Composition of mortgage market has changed in favour of home purchasers

  • Nearly 75% of new mortgage credit now going to home purchasers
  • First-time buyers consolidate position as largest market segment
  • Year-on year decline continues, but increase quarter-on-quarter

The IBF/PwC Mortgage Market Profile published today shows that over 7,800 new mortgages to the value of €1.31 billion were issued during the second quarter of 2010.

While the volume of new lending in Q2 2010 is down 38.3% compared Q2 2009, it is up 12.5% on the previous quarter (Q1 2010) – reflecting the seasonal pick-up in lending this time of the year.  However, within the continuing pattern of year-on-year decline in the market overall, the first-time buyers (FTBs) segment is again seen to be the most resilient in recording the lowest rate of decline and in remaining the single largest segment of the total market – albeit a smaller market.

The following are among the key features of the Q2 2010 data:

  • The number of loans to first-time buyers increased by 27.8% in Q2 compared to Q1 2010.  First-time buyers remain the single largest segment of the market by volume, accounting for 38% of all loans drawn down – the highest level since the IBF/PwC Mortgage Market Profile series began (Q1 2005).
  • Home purchasers – first-time buyers and mover purchasers combined – now account for almost 75% of new mortgage lending by value – up from 41% in Q1 2008.
  • While average loan sizes continue to trend downwards across all market segments, the average first-time buyer loan has fallen below €200,000, a level last recorded in Q2 2005 – reflecting lower house prices and loan-to-values (LTVs).

Commenting on the data, IBF Chief Executive, Pat Farrell, stated:

“This latest data confirms that the composition of the mortgage market has changed significantly over the last year or so.  With first-time buyers and mover purchasers now accounting for nearly three-quarters of new mortgage lending by value, the market – albeit a smaller one – is now dominated by those in the process of providing a home for themselves.  At the same time, the latest comparative interest rate data confirms that average mortgage rates here are still among the lowest in Europe.”

The IBF/PwC Mortgage Market Profile can be viewed on the web here.

Note:  Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Head of PR and Public Affairs, IBF, tel. 6715311, 087 6481644

Review of Code of Conduct on Mortgage Arrears

The Irish Banking Federation (IBF) welcomes the consultation process announced today by the Financial Regulator on the review of the Code of Conduct on Mortgage Arrears.

This review is intended to reflect the recommendations of the Interim Report from the Government-appointed Mortgage Arrears and Personal Debt Expert Group.  IBF participates in this Group and supports its recommendations.

IBF-member banks and building societies remain fully committed to working with those of their customers who are experiencing genuine difficulty with their mortgage repayments.  A range of initiatives have been put in place to help make this happen – including the IBF Pledge on Home Repossessions, the IBF/MABS Protocol on Debt Management and the designated websitewww.helpinghomeowners.ie – all of which are in addition to the existing statutory Code of Conduct on Mortgage Arrears. The forbearance policies and practices adopted by mainstream institutions are helping tens of thousands of consumers to work with their lenders in managing their mortgage and other debt repayments.

In conjunction with member banks and building societies, IBF will contribute constructively to this consultation – including focus on the practical implications of changes to lenders’ processes and systems as well as the timeframe for implementation.

Note:  Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Key trends evident in the Irish mortgage market, says IBF

  • At least half of all mortgages here are tracker products
  • Average mortgage costs here still among most competitive in EU
  • Fixed-rate mortgages growing in popularity over variable rate

The Irish Banking Federation (IBF) has today pointed to a number of key mortgage market trends that are evident from the latest figures published separately by the Central Bank of Ireland, the European Mortgage Federation and the European Central Bank.

1. The latest Central Bank figures for new mortgage lending show that the share of fixed-rate mortgages grew  in Q1 2010 to account for 26% of the market, with variable rate mortgages (incl. trackers) accounting for 74%.  The corresponding share for Q4 2009 was 19.6% fixed and 80.4% variable/tracker.  As the graph below shows, the fixed rate share of new lending is the highest for quite some time.

Mortgage Market Fixed Rate Share 050810 (3)

Source:  Central Bank of Ireland

2. Q1 2010 comparative figures published today by the European Mortgage Federation (EMF), drawing on Central Bank data, on the existing stock of mortgage lending show the breakdown in the market here to be 14.3% fixed rate and 85.7% variable rate (incl. trackers).

However, it is important to note that this variable rate category includes tracker products (as classified by the Central Bank of Ireland).  Indeed, the Central Bank has estimated that as much as 60% of outstanding variable rate mortgages here are tracker products – indicating that at least half of all outstanding mortgages are tracker products.

Thus, recent claims by the Irish Mortgage Corporation that EMF data show Irish mortgage holders to be uniquely vulnerable to rising interest rates compared to many of their EU counterparts are inaccurate.

3. The most recent European Central Bank figures show that average mortgage costs in Ireland are among the lowest in the EU.

Mortgage Market Costs APRC 050810

Source:  European Central Bank

Note:  Irish Banking Federation (IBF) is the leading representative body for the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace