BPFI Housing Market Monitor highlights a closing gap between demand and supply; however delays in supply are leading to latent demand

Banking & Payments Federation Ireland (BPFI) today published the BPFI Housing Market Monitor for Q4 2017. In addition to presenting a unique range of loan-level data, the Monitor draws on a range of published data under the three key headings of housing supply, housing prices and rents, and housing transactions in its assessment of the current state of the housing market.

In his commentary accompanying the report, BPFI’s Chief Economist, Dr Ali Uğur, refers to data from the Department of Housing, Planning, Community and Local Government as showing a significant pick-up in both house completions and commencements – increases of 29.7% and 33% respectively over 2017.  While this pick-up is most welcome, he goes on to state:

“While the gap between current demand and supply is narrowing, the delayed response in supply is creating latent demand for future years. Census 2016 showed that the total housing stock grew by just 8,800 (0.4%) between 2011 and 2016, whereas the population grew by 173,613 (3.8%) during the same period. Census data also shows that nearly one third of the Irish housing stock was built before 1970 and the home ownership rate has fallen from 74.7% in 2006 to 67.6% in 2016 – a 50 year low.”

Dr Uğur also notes that the statistical link between commencements and completions has broken down, such as to call into question the reliability of published completion figures.  Based as they are on connections to the electricity network, these completion figures capture the number of units coming into the market.  However, they do not necessarily reflect the true nature of full residential construction activity.

Ali also points to on-going growth in mortgage activity in support of the housing market.  “BPFI data show that there were 934,798 mortgage drawdowns valued at €7.3 billion in 2017 compared to 29,498 drawdowns valued at €5.7 billion in 2016 – representing an 18% increase in volume terms and 29% increase in value terms. Mortgage approval activity also significantly increased in volume terms by 23% in 2017 bringing the total number of approvals to 43,074. In value terms activity increased by around 34% in 2017 with the total value of approvals reaching €9.3 billion in 2017.”

Finally, Dr Uğur also points on the risks associated with further price rises, “Price developments in the Irish residential property market have been driven mostly by the lack of supply in the market, particularly in the last three years. However leading indicators have shown pressures building up in relation to input prices which can have a knock on effect on output prices. Rising costs could lead to future price rises even as the supply gap closes.”

To view the report, click here.

Note: Banking & Payments Federation Ireland (BPFI) is the voice of banking and payments in Ireland, representing over 70 member institutions and associates

Contact: Keira Doyle, Head of Communications, 086 269 4460

Mortgage Approvals – January 2018

Banking & Payments Federation Ireland (BPFI) has published the latest figures from the BPFI Mortgage Approvals Report for January 2018.*

The following are the key elements:

  • A total of 3,145 mortgages were approved in January 2018 – some 1,500 (47.7% of total volume) were for first-time buyers (FTBs) while mover purchasers accounted for 910 (28.9%).
  • The number of mortgages approved rose by 11.6% year-on-year and by 14.6% month-on-month.
  • Mortgages approved in January 2018 were valued at €689million – of which FTBs accounted for €329million (47.8%) and €232million (33.7%) by mover purchasers.
  • The value of mortgage approvals rose by 20% year-on-year and by 15.2% month-on-month.

Re-mortgage/switching approvals rose on a year-on-year basis – by 74.8% in value and by 77.6% in volume terms. An analysis of mortgage approvals on an annualised basis shows that the fastest growing segment, yet again, was switching – with volumes more than doubling between April 2016 and January 2018 to 3,772. In addition, the annualised volume of mortgage approvals rose for the 22nd consecutive month, rising by 0.8% in the 12 months ending January 2018 to 43,401.

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 January 2018  as well as the time series data file is available on the BPFI website here.


[*] The full time series of monthly data from January 2011 onwards is available on the BPFI website.

Note: Banking & Payments Federation Ireland represents 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: Keira Doyle, Head of Communications, 086 2694460

Stakeholder Engagement – February 2018

The recent announcement of the link-up between the Fintech and Payments Association of Ireland (FPAI) and BPFI was marked by a seminar on the implications of the new Payment Services Directive (PSD2) for financial services.  A large number of representatives from across the banking, payments and fintech landscape benefited from and participated in a most interesting panel discussion which involved Ruth McCarthy (FEXCO), Michele Olin (AIB), Adam Kissane (Deloitte) and Sophie Office (Sage).  The event was moderated by Michael Concannon, newly-appointed Head of FPAI Strategy and Development, who will lead the affiliate within the overall BPFI structure.

BPFI President, Jonathon Lowey, officiated at the Student Achievement Awards which saw the country’s four top scoring students of business subjects in the 2017 State examinations receive gold medals from the Business Studies Teachers’ Association of Ireland (BSTAI).  The worthy recipients were Cathal Curran from Tullamore for Leaving Cert Accounting, David Conneely from Galway for Junior Cert Business Studies,), Padraig Meehan from Monaghan for Leaving Cert Economics and Darren Seymour from Skibbereen for Leaving Cert Business.  Representatives from the Dept of Education and other stakeholders, together with teachers and parents, were also addressed by the BSTAI President, Ultan Henry, and by Sinead Grace, Knowledge Lawyer with A&L Goodbody and a previous Award winner.

Interest Rate Risk in the Banking Book

BPFI has submitted a response to the European Banking Authority’s (EBA) Consultation Paper on the Draft Guidelines on the management of interest rate risk arising from non-trading book activities. The EBA has issued an update of its Interest Rate Risk in the Banking Book (IRRBB) Guidelines as a first step in the implementation of the updated Basel Committee on Banking Standards (BCBS) standards adopted in April 2016. The remaining part will be implemented through the ongoing revision of the Capital Rights Directive (CRD) and the Capital Rights Requirements (CRR) and the enactment of a number of technical standards that are expected to be mandated to the EBA in the revised CRD and CRR. If unchanged, the European Commission proposals mandate the EBA to develop regulatory technical standards with specific reference to the standardised methodology, the parameters for the supervisory outlier test, and disclosure requirements related to IRRBB.

IFS 2020 – Action Plan 2018

Minister of State at the Department of Finance with special responsibility for Financial Services, Michael D’Arcy, published the IFS 2020 Action Plan 2018 late last month. BPFI and FIBI welcome the inclusion of a number of actions we proposed which include:

  • A public sector Financial Services sub-group to engage with the Cabinet Committee on Brexit (Action 1)
  • Presentation of official up-to-date data on Ireland’s IFS offering and economic data to be made available quarterly on an agreed date on IFSIreland.com (Action 12)
  • Consideration of amendments required to Irish Covered Bond legislation (Action 38)
  • Conducting a FinTech census to provide a fact base on the scope, scale and strategic positioning of the sector – highlighting areas where Ireland needs to improve, drawing on best practice from other leading FinTech hubs (Action 28)

EBA Stress Testing and Macroeconomic Scenarios

The European Banking Authority (EBA) launched its 2018 EU-wide stress test at the end of January and released the macroeconomic scenarios on the same day. It is expected that the results of the exercise will be published by 2 November 2018. For the first time, the EBA stress test will incorporate IFRS 9 accounting standards. The EU-wide stress test will be conducted on a sample of 48 EU banks, including two banks from Ireland. Significant institutions not covered under the EBA test will go through the Single Supervisory Mechanism (SSM) stress test exercise using the same EBA methodology; however, results of this test will not be published and will feed into the Supervisory Review and Evaluation Process (SREP). The baseline scenario used by the EBA is in line with the December forecast published by the European Central Bank (ECB). The adverse scenario assumes four systemic risks related to repricing of risk premia globally: weak bank profitability and low growth due to decline in economic activity in the EU, debt sustainability and liquidity risk in the non-bank financial sector.

SME Regulations

The Central Bank of Ireland (CBI) published Amendment Regulations in January to deal with the matter of the definition of SMEs for the purpose of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015. BPFI welcomes publication of the Amendment Regulations, following extensive representations on this matter.

Single Supervisory Mechanism (SSM)

In January BPFI attended a booking models workshop for Single Supervisory Mechanism (SSM) Banks in the European Central Bank (ECB). Building on the technical workshop held last June on the impact of Brexit on the UK operations of banks and banking groups headquartered in the SSM, the ECB organised this additional technical workshop for banks. The purpose of this workshop was to provide information to banks affected by Brexit, in particular on the SSM’s supervisory expectations on booking models and empty shells.

The SSM’s focus is now on the practical implementation of policy stances developed for SSM. For existing SSM banks they are looking to ensure that there are sufficient capabilities for managing risk in the EU under a hard Brexit. For incoming SSM Banks they want to ensure that the infrastructure, risk management and staffing commensurate with EU27 activities are in place. They outlined that banks should consider adjustments to their global business processes and policies in view of the supervisory expectation, in particular in relation to booking modes and the scope of services provided by third country branches. The SSM supervisory expectations span the following five areas:

  1. Internal governance, staffing and organisation – Risk Management framework must be robust, documented and adequately staffed
  2. Business origination and financial market infrastructure access – No reliance on third country risk hubs
  3. Booking and hedging strategies – Must be sufficiently independent with local decision making capacity and safeguards
  4. Intragroup arrangements – Avoid undue complexity
  5. IT infrastructure & reporting – Ability to complete daily and accurate reports and operational continuity ensured.