Mortgages are bouncing back, but rate is still down by third

‘It’s picked back up’

Irish paying highest rates

MORTGAGE lending is bouncing back from the Covid-19 shutdown, figures show.

About 2,400 new mortgages were approved in July which is up 13% on June. However, year-onyear lending is still down a ‘substantial’ 35%.

The new mortgages totalled €556million in July, a decrease of 35% on a year earlier but it was a 13% increase on June and the second consecutive monthly increase since March, the Central Bank reported.

Banking and Payments Federation of Ireland chief economist Dr Ali Ugur said: ‘Applications are down, yes, because of Covid and also uncertainty around the future jobs market. The drawdown rate, i.e. moving from mortgage approval to actual drawdown of mortgage, has not changed year-on-year. People are holding off as there is no certainty about the housing market – will prices go down or up?’

The lending equates to about 2,400 mortgages at €230,000 each, which would buy a house at the average price of €287,000 with the 20% deposit needed under the Central Bank’s lending rules.

David Hall, of the Irish Mortgage Holders Organisation which campaigns for struggling homeowners, said: ‘This is hiding the fact that the last six months have been a disaster. A drop of 35% yearon-year is very substantial.’

He believes the fall is a com‘It bination of banks pulling lending because people’s employment has been disrupted and people are not borrowing for the same reason.

’It’s concerning times, it’ll mean less bidders,’ he said.

There’s less people selling, as clearly there are less people to buy houses. Those that have cash, they’re clearly in a better position, but it’s unclear what will happen to the prices yet.’

Diarmuid Kelly, CEO of Brokers Ireland, said: ‘There’s been quite a bit of activity in the mortgage market recently, it’s picked back up.

‘The months of April, May and June were very quiet. House prices have remained relatively steady. I think it’s a resurgence of pentup demand.

‘The banks put in an awful lot of stipulations on mortgages that were approved in principle and not drawn down. Anyone on Covid payments, their whole file was reviewed.

is starting to get back to normal, there was certainly a big dip March to June.’

Karl Deeter, of Irish Mortgage Brokers, said: ‘Not everyone buys with a mortgage, and if you look at the number of transactions taking place, it obviously collapsed during Covid. Then when you wanted a mortgage, it seems that being on the Covid payment schemes stops you being able to draw down a mortgage.

‘These are all factors that would cause those mortgage numbers to drop, yet prices haven’t dropped.

‘I was wrong, I thought we would see double-digit price drops, it just doesn’t seem to be happening. Every broker is busy. In fact, some are seeing monster amounts of applications come in – to the extent that they can’t deal with them. I think they’re up because people who were on the Covid payments who were thinking the world was going to end and now thinking it’s not going to end.’

The Central Bank reported that €445million was agreed in new fixed-rate mortgages, a decrease of 31% on July the previous year but new variable-rate mortgage agreements declined by 46% year-on-year, to €111million in July.

Fixed-rate mortgages now make up three-quarters – 76% – of deals now which is only slightly lower than the 84% rate in the rest of the euro area.

Irish borrowers are still paying one of the highest rates in the eurozone. The average rate in Ireland was 2.82% in July, up three basis points on the previous month, while the average for the euro area stood at 1.35% in July.