Mortgage Approvals – November 2014

Banking & Payments Federation Ireland (BPFI) has published the latest figures from the BPFI Mortgage Approvals Report for the three months ending November 2014.

The following are the key elements:

  • A total of 2,752 mortgages were approved per month, on average, in the three months ending November 2014, of which 2,537 (92%) were for house purchase.
  • The number of mortgages approved rose by 52.8% year-on-year and 6.6% month-on-month.
  • The value of mortgages approved per month, on average, in the three months ending November 2014 was €502 million, of which €477 million (95%) was for house purchase.
  • The value of mortgage approvals increased by 56.4% year-on-year and by 7.7% month-on-month.

The year to end-November has seen some 23,796 mortgage approvals, up 42.2% on the same period in 2013, valued at €4.2 billion.

Data collection for the BPFI Mortgage Approvals Report began in September 2012 covering the period from January 2011 onwards in respect of the market’s main mortgage lenders. The BPFI Mortgage Approvals Report November 2014 is on the BPFI website here.

All figures are based on the three-month moving average. Year-on-year compares the average for the three months ending November 2014 with the three months ending November 2013. Month-on-month compares the average for the three months ending November 2014 with the three months ending October 2014.

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Note: Banking & Payments Federation Ireland is the voice of banking and payments 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, Head of Communications, BPFI, ph: 01 474 8835 / 087 9016880

BPFI’s response to Central Bank consultation on proposed macro prudential measures for mortgage lending

  • Support for proposed Loan to Income measure for principal dwelling house
  • Support for proposed Loan to Value measure for buy to lets
  • Concerns about proposed Loan to Value measure for principal dwelling house

In its submission on the Central Bank of Ireland’s consultation on Macro Prudential Policy for Residential Mortgage Lending Banking & Payments Federation Ireland (BPFI) supports the proposed loan to income (LTI) measure for principal dwelling house (PDH) loans and supports the proposed loan to value (LTV) measure for buy to let (BTL) loans. However, BPFI has significant concerns about the impact of proposed LTV measure for PDHs and about the potential for mortgage insurance as proposed.

BPFI and its member banks recognise the importance of ensuring the stability of the banking system and of protecting households from the risks of over-indebtedness. We are in agreement with the Central Bank on the need to ensure that a “credit-driven bubble does not take hold” and believe that responsible lending through a robust credit assessment process is key to delivering the improved resilience and stability of the financial system. Member banks adhere to internal governance models in developing robust credit policy and standards for all new lending which must also meet capital requirements, a driver of the European financial stability regime.

BPFI and its member banks also acknowledge that macro prudential tools have a valid role to play in the supervision/regulation of the banking system. However, we note from the CBI consultation paper that there “is little indication at present of bank credit being an important driver of the recent increase in property prices in Dublin, with the volume of new lending still very low”. This assessment mirrors that of our members who also see no evidence of a credit driven bubble in property prices and point to cash buyers as playing a significant role in this regard.

The proposed application of an LTV of 80% on PDH loans is neither necessary nor appropriate for the mortgage market at this point in the cycle. In our view the proposal would give rise to significant unintended consequences which include the following:

  • the immediate and continued exclusion of cohorts of potential home owners, in particular First Time Buyers with savings of less than 20% of the purchase price of a property
  • the potential for applicants to seek funds from other lenders, family, friends etc; or to defer payments to pensions, insurance policies and other beneficial long term investments in order to accumulate the proposed level of deposit funds
  • the impact on ongoing housing supply issues, particularly for potential new developments, driven by uncertainty regarding demand drivers.

In noting recent commentary around the potential for mortgage insurance, we do not believe that it offers a solution to the issues that the Central Bank is seeking to address. We also agree with the Central Bank’s stated view that the transfer of risk from one area of the financial sector to another would not benefit the economy – as has been the experience with mortgage insurance through the recent financial crisis.

BPFI and its member banks are keen to work with the Central Bank to explore how best these issues and potential – but as yet undetermined – related outcomes could alternatively be addressed.

The full submission can be viewed on the BPFI website here.

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Note re. Central Bank Proposals
The measures as proposed by the Central Bank of Ireland are:

  • restrict new lending for PDHs above 3.5 times LTI to no more than 20 per cent of the value of all new PDH loans
  • restrict new lending to buy to lets above 70 per cent LTV to no more than 10 per cent of the value of all housing loans for investment purposes
  • restrict new lending for PDHs above 80 per cent LTV to no more than 15 per cent of the value of all new PDH loans

Note: Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments 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, Head of Communications, BPFI, ph: 01 474 8835 / 087 9016880

BPFI Housing Market Monitor points to growth in mortgage approvals and drawdowns

  • Total mortgage approvals for 2014 estimated at €4.3 billion

In his commentary accompanying the latest edition of the BPFI Housing Market Monitor Q3 2014, published today by Banking & Payments Federation Ireland, BPFI’s Economist and Head of Accounting & Tax, Ali Uğur, points to the importance of viewing recent house price increases in context.

Referring to the 16.3% increase in the national price level and the 24.2% increase in Dublin prices in the year to October 2014, he writes:

“It is important to view the significant increase in residential property prices in the past 12-18 months in the context of a market where prices declined by around 60% from peak to trough between 2007 and 2013.”

Pointing to the strong growth in the number of mortgages approved by lenders, he states:

“Mortgage approvals are a good indicator of potential demand for housing and the latest mortgage approvals data shows another strong performance in the third quarter of 2014, with the number of mortgages approved up by 46% year-on-year…………It is estimated that, if existing trends continue, the total value of mortgage approvals for 2014 will be €4.3 billion.”

However, Uğur goes on to state that proposals from the Central Bank of Ireland on macro prudential policy for residential mortgage lending could have a considerable impact on future trends in the housing market.

“As currently structured, they will impact significantly on first-time buyers’ ability to purchase a home as well having indirect, and arguably unintended, consequences for construction activity……..Proposals aside, the primary challenge remains the inadequate supply of housing in the current market, especially in Dublin, and this is likely to be reflected in rising house prices and rents.”

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The BPFI Housing Market Monitor is published quarterly and can be viewed on the BPFI website here.

Note: Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments 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, Head of Communications, BPFI, ph: 01 474 8835 / 087 9016880