Mortgages at Pre-Covid Levels Even as Prices Rise

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New mortgages are exceeding pre-pandemic levels, with a sharp increase in the number of first-time buyers approved for a home loan in August.

Nearly € 1.2 billion in first-time home mortgage loans were approved in August, 22.6% more than in August 2020 and the highest number since the Banking and Payments Federation Ireland (BPFI) started tracking data in 2014.

Data on approvals indicates that households have gone through the pandemic with their finances intact.

This, combined with the record savings achieved over the past 18 months, indicates strong housing demand which is expected to put further pressure on prices.

This is all the more true as the supply of new housing remains well below the consensus that around 35,000 new properties per year are needed.

The number of mortgages approved in June, July and August of this year was ahead of the same period in 2019, before Covid disrupted home construction and home sales.

In the three months ending in late August 2021, lenders approved 14,808 new mortgages, up from 13,962 during the same period in summer 2019.

Comparisons with last year are tricky because the number of applications for or obtaining a mortgage loan was volatile from month to month during the blockages.

The average amount of a new mortgage loan approved in August was € 253,627, an increase of about € 18,000 from the amount of loans before the pandemic.

Figures from the Banking and Payments Federation Ireland (BPFI) show that lenders – including traditional and more niche banks, non-bank lenders – have approved nearly € 13.4 billion in approved mortgages over the years. 12 months ending in August 2021.

Larger average home loans from the pandemic than at the start reflect rising house prices, but the number of approved mortgages suggests that banks are finding eligible borrowers who meet strict Central Bank rules even as they housing prices have increased.

The pick-up in lending preceding the pick-up in new home completions also suggests that more first-time buyers are buying in the used home market – even if this moves them away from eligibility for government supports like Help to Buy.

On an annualized basis, 54,208 mortgages were approved in the 12 months ending August 2021, valued at € 13.4 billion.

The number of new homes completed in 2020 was 20,000 and is expected to decline this year due to start-up delays diets during Covid.

Slightly more than half of the 4,572 home loans (1.2 billion euros) approved in August were intended for first-time buyers (2,462), while buyers who have moved represented 1,181 (25.8 pc) .

The rest were made up of people switching to new lenders, people getting top-up home loans often for home renovations, and a small but growing number of rental investors.

Not all approvals result in drawdowns, but numbers show loans are at or above pre-Covid levels.

BPFI chief economist Ali Ugur said the latest approvals showed continued growth in loans, especially to first-time buyers.

“These are significant numbers and signal a strong pipeline for withdrawal activity later in the year very well,” he said.

BPFI does not break down the data by bank, but figures suggest reported exits of Ulster Bank and KBC Bank Ireland from the market did not have a major effect.


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