Banks are not doing a whole lot at present

Mortgage lending in Ireland totalled €2.63bn last year, which although modestly higher than the previous year, was still a far cry from the almost €40bn lent in 2006.

Prior to the publication of the lending data for the final quarter of last year I had anticipated that the mortgage market for the full year would not have been too far north of €2bn, but the surge in lending in the final quarter blew my forecast out of the water. During the final three months just under €1bn was loaned, almost 38% of total lending for the full year. One interpretation of this surge was that the market was at last starting to function more normally, but a less benign interpretation was that the surge was due to the ending of mortgage interest relief at the end of December. The latter interpretation appears to be the more correct one.

The latest data on mortgage lending relating to the first three months of this year were released earlier this week and clearly indicate the mortgage market is still not functioning as it should, or more precisely the mortgage lenders are still not functioning as they should. Just €331m was loaned during the quarter, a decline of over 26% on the same quarter in 2012. This is a dismal level of lending, but if we try to adjust for the exceptional factors in the final quarter of last year, the picture is somewhat better — in the six-month period to the end of March, lending was 22% higher than the same period in 2012. This analysis may be too charitable, as it is clear the flow of mortgage credit into the system is still inadequate, and the mortgage lenders may struggle to achieve the €4bn in lending that I have anticipated for 2013. Only time will tell.