Mortgage Approvals Return to Growth in February

  • Approvals show monthly increase of 30%
  • House purchases continue to account for vast majority of new mortgage approvals

The latest figures from the IBF Mortgage Approvals Report, published today, show that a total of 1,093 mortgages to the value of €169 million were approved by lenders here during February.  This is up 30% on the equivalent figure in the month of January.

While the overall figures show a slight fall of 2.1% in mortgage approvals on an annual basis, approvals in the key category of house purchases, which accounted for the vast majority (90%) of all approvals, grew by 1.4% year-on-year. The number of mortgage approvals for re-mortgage/top-up purposes continued to decline annually.

The value of mortgages approved for house purchases during February stood at €159 million – the lion’s share by far of the €169 million approved in total.  At €160,695, the average mortgage for a house purchase was down 2.8% on the same time last year.

Commenting on the data, IBF’s Director of Public Affairs, Felix O’Regan, stated:

“With the earlier part of the year traditionally the weakest for mortgage activity, it is encouraging to see growth in approvals return in February when compared to January.  And while the latest figures show a slight annual decline in the total number of approvals, the year-on-year growth in the important house purchase segment is a positive trend which we hope to see continue in the coming months.”

The IBF Mortgage Approvals Report can be viewed on the IBF website here.

Notes

Data collection for the IBF Mortgage Approvals Report began in August 2012 covering the period from January 2011 onwards in respect of the market’s main mortgage lenders.

The Irish Banking Federation (IBF) is the principal voice of 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.

Contact: Jillian Heffernan, Marketing Communications Manager, IBF, ph: 01 6715311/087 9016880

Central Bank figures show new lending to SMEs at highest level in two years

New lending drawn down by SMEs during Q4 2012 amounted to €677 million, which is the highest level since Q4 2010.  This is confirmed by Trends in Business Credit and Deposits published by the Central Bank today.

While the Central Bank figures also show that total lending to SMEs in Q4 fell by 1.6% over the previous quarter, this reflects the fact that businesses are repaying existing debt more than they are taking out new credit.

In assessing the significance of trends in the Central Bank data it is important to distinguish between the level of gross new lending being drawn down and the total stock of credit outstanding which comprises both new and existing credit.

SME new lending Q4 2012

SME demand for new credit remains relatively subdued, but banks have the capacity to match demand as it increases.  They are already approving an estimated 2,000 applications for credit each week.

“The level of draw down of new credit facilities is the real barometer of how the SME sector is faring in the current challenging economic environment.  It is notable that this is at its highest level in two years.  This is significant, particularly when taken in conjunction with a number of recent surveys from the business sector indicating that business confidence is on the increase”, stated Felix O’Regan, IBF’s Director of Public Affairs.

Delivering Mortgage Arrears Resolution

In noting today’s announcement from the Central Bank of Ireland, the Irish Banking Federation (IBF) reaffirms the commitment of its member banks to actively address the mortgage arrears challenge.  To this end, IBF welcomes the further development of a framework which provides for the interests of both borrowers and lenders in delivering sustainable solutions.

IBF and its members share the Central Bank’s objective to return as many loans as possible to performing status and to make such modifications to loans as are necessary to ensure a sustainable outcome.  This process is already well underway, as reflected in the 102,000 mortgage accounts – principal dwelling house (PDH) and buy-to-let (BTL) – which have been restructured to date. Moreover, the Central Bank arrears statistics published last week confirm a notable evolution from temporary to more permanent arrangements for customers. The number of permanent arrangements, such as arrears capitalisation and term extensions, increased by 13% in Q4 2012 over the previous quarter. This represents clear recognition by lenders of the appropriateness of longer-term resolutions for certain borrowers.

The Central Bank’s Mortgage Arrears Resolution Targets document contains considerable detail that will require close examination by lenders, including how the proposals on provisioning are aligned with existing international accounting standards.  In this regard it should be noted that a provision against doubtful debt does not in itself imply a loan writedown.

IBF also notes those elements of today’s announcement that will better enable lenders to deal fairly and effectively with mortgage customers in financial difficulty.  The immediate review of the Code of Conduct on Mortgage Arrears, in particular the provisions relating to customers who do not co-operate and customer contact generally, should prove a positive enabler for constructive lender/customer engagement.

In the meantime, IBF-member banks continue to devote very considerable resources to supporting borrowers in difficulty through their own customer comprehensive outreach programmes, as well as their funding and support of the independent Mortgage Arrears Information and Advisory Service for mortgage customers in arrears.

Commenting on the announcement, IBF’s Director of Public Affairs, Felix O’Regan, stated:

“As the Central Bank affirms, finding a sustainable solution that fits each case is challenging and time-consuming; and no simple mechanical formula can substitute for a case-by-case approach.  Today’s announcement is essentially about accelerating the process of finding sustainable solutions – a process to which banks are fully committed notwithstanding the complexity and scale of the challenge.  However, real progress is contingent on their having the full range of tools which is why the immediate review of the Code of Conduct on Mortgage Arrears is welcome and why outstanding action on the Justice Dunne judgment, modernisation of the legal process in line with other jurisdictions and clear policy support for the prioritisation of secured over unsecured debt are so important.”

Contact: Nuala Buttner, Q4 PR, tel 085 1744275

Note: The Irish Banking Federation (IBF) is the principal voice of 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.

Continuing slowdown in growth of arrears is welcome, says IBF

The Irish Banking Federation (IBF) notes that the latest Central Bank statistics on mortgage arrears confirm a continuing slowdown in the rate of growth in arrears.  While the total number of private residential mortgages in arrears has increased, as had been expected, this further slowing of growth in arrears is particularly welcome.

As the following statistics and graphs show, the slowdown in the growth in arrears is evident across different stages of arrears:

  • a decline in the number of early stage arrears of less than 90 days – a quarter-on-quarter decline of 1.3%
  • a further slowing in the pace of increase in arrears over 90 days – the slowest quarter-on-quarter rate of increase since Sept’09
  • a further slowing in the pace of increase in arrears over 180 days

Mortgage arrears Q4 2012 change trends

The decline in early-stage arrears (less than 90 days) is particularly significant as it confirms that fewer customers are falling into arrears.

At the same time, the overall level of mortgage arrears has increased to 11.9% of all private residential mortgage accounts.  However, this should come as no surprise given the difficult economic conditions faced by a sizeable number of customers.  Nor is it unexpected that the number of accounts in long-term arrears over 720 days has increased, as increases in new mortgage arrears in previous periods will be followed some time later by a deterioration in the level of longer-term arrears.

The fact that a total of some 102,000 mortgage accounts – principal dwelling house (PDH) and buy-to-let (BTL) – have been restructured is testament to banks’ commitment to working with distressed customers to find workable solutions.  They remain fully focused on addressing customer arrears, doing so diligently on a case-by-case basis where the borrower is fully engaged and where full and accurate information is provided by means of the Standard Financial Statement (SFS).  This includes the provision as appropriate of loan modification and resolution options to borrowers for longer-term and more sustainable solutions.

It is also notable that the small decline to some 80,000 in the total number of restructured PDH mortgage accounts is accounted for by a fall in the number of temporary restructure arrangements such as payment moratoria and interest only arrangements; while at the same time the number of permanent restructure arrangements such as term extension, arrears capitalisation and split mortgages has increased.

Commenting on the figures, IBF’s Director of Public Affairs, Felix O’Regan, stated:

“This continuing slowdown in the growth of various categories of arrears is very welcome and it mirrors what member banks have been reporting to IBF.  A considerable challenge lies ahead of course in dealing with the overall stock of arrears and banks are fully committed to that challenge.  However, they need the full range of tools to be fully effective which is why urgent action on the Justice Dunne judgment, an immediate review of the Code of Conduct on Mortgage Arrears, modernisation of the legal process in line with other jurisdictions and clear policy support for the prioritisation of secured over unsecured debt are so important.  Notably, today’s statistics reflect a discernible evolution from temporary to more permanent arrangements for customers which is clear recognition by lenders of the appropriateness of longer-term resolutions for some borrowers.”

Contact: Nuala Buttner, Q4 PR, tel 085 1744275

Note: The Irish Banking Federation (IBF) is the principal voice of 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.

IBF welcomes breakthrough on banks’ capital requirements

IBF welcomes breakthrough on banks’ capital requirements

The Irish Banking Federation (IBF) welcomes the provisional agreement by the Irish Presidency and the European Parliament towards adoption of the Basel III agreement into European law and the creation of a single EU rule book in banking for the first time. This is a notable achievement for the Irish EU Presidency.

These rules will lead to a more robust banking sector as a whole, which covers higher and more rigorous standards for all 8,300 banks in Ireland and across Europe. These measures include increased and higher quality capital, a more solid liquidity base and additional capital buffers to be built up over the next six years.

Throughout the process, important adjustments to the Commission’s draft texts have been made, some aiming to help banks better support the real economy, for example in the area of more realistic liquidity requirements.

However, the IBF notes that there are some areas where the rules may appear to undermine the Single Market. Clearly, the degree of flexibility provided to Member States to set higher standards than the common norm deviates from a clear and common rule across all Member States. Similarly, while the intentions behind Parliament’s interventions on reporting transparency are understandable, it remains to be seen what effects these will have on the competitiveness of Europe’s banks in a wider sense or what impediment they may pose to inward investment.

The banking sector awaits the precise timetable that will emanate from this provisional agreement once ratified by all Member States and the European Parliament. It is crucial that the Capital Requirements Regulation (CRR) should be in place before the Single Supervisory Mechanism takes effect.

The IBF and its members will continue to work with EU authorities, thorough its relationship with the European Banking Federation, to achieve practical technical standards to implement on the ground any new agreed measures.

Note: The Irish Banking Federation (IBF) is the principal voice of 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.