Mortgage lending falls by 50% despite slight increase in last few months

MORTGAGE lending has fallen by more than 50% in the last year but edged up slightly in the last few months.

The value of new mortgage lending in the third quarter of 2011 was €623 million, according to the latest IBF/PwC mortgage market profile. During that time, 3,607 mortgage loans were issued which is a 50.3% drop compared with the same period last year.

However, it is an increase of 1.6% on the previous quarter. This is the first time since quarter three 2006 that the number of loans has increased in two consecutive quarters.

First time buyers remained the largest segment, increasing their share to almost 47% of the market, the highest since the series began in 2005. Mover-purchasers increased their market share by almost four percentage points quarter-on-quarter. Combined with first time buyers they accounted for nearly four-fifths of the market by volume.

Chief executive of the Irish Brokers Association, Ciaran Phelan said banks are exiting the new mortgage market “as fast as they can”.

“KBC announced the withdrawal of one of their products earlier this week further reducing the options for those who want to buy.

“A number of banks recently reported a rise in the level of arrears citing possible strategy defaulting, where the borrower has sufficient income to pay the mortgage, but chooses not to do so. Homeowners, particularly those who need to trade up for more space are increasingly frustrated at the banks inflexibility.”

Mr Phelan said banks need to realise that negative equity is not a temporary issue.

“They need to become far more flexible in their approach. The arrears data due out later this month will tell a sorry tale with growing arrears and increased frustration amongst mortgage holders, who see a complete lack of any meaningful solutions from the government or the banks,” he said.

Director of research at Savills, Joan Henry said the demand to purchase from income-secure first time buyers is “as strong as ever” but the issue is the availability of credit.

“Three years of relative stagnation has increased the pressure on those needing to trade-up. We need some action on imaginative mortgage products that will enable those with strong incomes and expanding families to trade up,” she said.

Frank Conway, director of the Irish Mortgage Corporation, said 2011 is now on track to being the worst year for mortgages since 1971.

“It is imperative that lenders return to lending soon. According to our own internal statistics, I believe that consumer enquiries for mortgages has decreased by about 10 to 15% since the same period in 2010, yet bank lending has fallen by a far greater percentage, highlighting their overwhelming loss of appetite for new lending,” he said.

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