Monthly drop in mortgage approvals

A near 6% monthly fall in home loan approvals is “indicative of a dysfunctional market”, an industry representative has stated.

Figures published yesterday by the Irish Banking Federation show a 32.6% year-on-year increase in mortgage approvals for February, with 1,494 mortgages being granted to a total value of €252m. However, on a monthly basis, February represented a 5.9% drop in approvals.

Federation chief Noel Brett said the month-on-month fall can be explained by “seasonality factors”, but that the annualised growth “is a positive indication that mortgage activity is strengthening and the market is growing”.

The Professional Insurance Brokers Association said the monthly drop is significant “at a time when mortgage approvals should be ramping up to at least meet a reasonable proportion of the pent-up demand in the market”.

Chief operations officer Rachel Doyle said: “The figures, while up 32.6% on February 2013, still have a long way to go and are clearly coming from a very low base. In short, the figures are indicative of a dysfunctional market.”

Ms Doyle said a normally functioning market should be lending about €8bn-€10bn annually.

It has previously been estimated that total mortgage lending values will remain stable at just over €3bn this year.

Negative equity, a lack of supply of appropriate housing in the Dublin area, and the lack of an effective solution to the arrears situation are hampering a return to normality, with first-time buyers set to feel the brunt of the low approval levels, according to Ms Doyle

“The low level of lending and the other factors at play means that many first-time buyers — in particular, those who have the capacity to repay loans — are being squeezed out of the market at a time when property prices are most likely at the bottom of the market and in very many instances it is now cheaper to buy than rent.”