New mortgage lending plunges

THE value of new mortgages issued during the first three months of this year fell 37% on the same period last year to an historic low, according to the latest figures.

The first of the quarterly Mortgage Market Profiles from the Irish Banking Federation (IBF) and PricewaterhouseCoopers (PwC) to be released this year shows that 7,000 new mortgages, with a combined value of €1.22 billion, were issued in the first quarter of 2010. The first quarter of 2009 saw just shy of 11,000 new mortgages issued, with a combined value of €1.99bn. That means the year-on-year value decline for first quarter mortgage lending amounted to 39%.

Despite the continued fall in mortgage activity, the overall rate of decline is continuing to fall, as it has done for the past three quarters.

“Within this overall picture, it is reassuring to see that the first-time buyer segment remains comparatively resilient. So much so that first-time buyers remain the single largest segment of the market, albeit a smaller market. And, combined with mover-purchasers, they now account for almost 70% of the total market in value terms,” according to IBF chief executive Pat Farrell.

Although the IBF does not forecast future lending trends, Mr Farrell conceded it would probably take “a few more quarters” before the market returned to year-on-year growth. Recent trends would back this up, as the rate of mortgage lending decline has slowed by around 10% every quarter since the second quarter of last year. He added, however, that in the longer term, the Irish mortgage market will be a much smaller market than has been the case of late.

Despite hope of a recovery, the latest mortgage figures, the lowest in the 16 editions of the IBF/PwC survey, were described by the Professional Insurance Brokers Association (PIBA) as being “nothing short of alarming”.

“Unless the Government intervenes, we could be looking at a figure as low as €5bn in total mortgage lending for the entire year. The rationing of credit on this scale could spell disaster, throttling the fledgling recovery in the economy,” said Rachel Doyle, PIBA’s director of mortgage services.