Mortgages issued in Q2 down 64%

THE latest IBF/PwC mortgage market statistics show the number of mortgages issued in Q2 fell by a massive 64% year-on-year to 12,686.

The value of new mortgages written in the second quarter was €2.2 billion and represents an increase on Q1, in line with seasonal trends.

New lending in the second quarter was up 15.4% against the previous quarter, reflecting normal seasonal patterns of stronger mortgage lending in Q2.

First-time buyers now account for one in four of all new mortgages issued and account for a 25% share of the market by volume.

The latest review says they “have consistently increased their market share over each of the last six quarters”.

At this stage in the property market the key home purchaser segments of first-time buyers and mover purchasers together account for 60% of the total market by value.

The residential investment letting market continues to decline and was the only area not to record a quarter-on-quarter increase.

“While the overall level of mortgage activity continues to reflect the very challenging economic environment, it is reassuring to see that those focused principally on home purchase, first-time buyers and mover purchasers, now have a record share of the total market, albeit a smaller market.

By contrast, the investment end of the market continues to show the greatest decline”, said IBF chief executive Pat Farrell.

Senior bankers have commented that, while the level of loan inquiries is rising, it is not reflected in the borrowing figures that are forecast to stay quite low over the rest of the year.

On the back of the latest statistics Davy Research has revised downwards its projections for 2009. With just €4,171m of mortgages issued in the first half, they said their previous full-year estimate of €12bn for gross lending looks too ambitious and have cut it to €8.7bn.

With new lending collapsing, the only reason mortgages outstanding are not falling in tandem was because the repayment rate has also collapsed. The average life of a mortgage has moved up from 6.5 years in 2006/2007, to double digits because “people cannot switch and are more inclined to prioritise current spending or pay off more expensive personal debt rather than pay off mortgage debt”, Davy said.

Central Bank data for end-June also showed the first month-on-month decline in outstanding mortgage debt which fell slightly month on month.