Number of approved mortgages up

The mortgage market is continuing to show signs of a significant pick-up, despite total lending still lagging far behind normal levels.

Last month, the number of approved mortgages rose by almost 50% compared with the same period last year, while the value of these loans also rose by nearly 60%.

In the second quarter of the year, approvals increased by more than 40% with the value of these approvals also up on the same period a year ago.

Commenting on the results yesterday, Goodbody chief economist, Dermot O’Leary said the figures released by the Irish Banking Federation represented the highest level of approvals in more than three years.

“There was continued momentum in the mortgage market in June, according to the latest data from the Irish Banking Federation this morning.

“In Q2, the number of approvals grew by 41% with the value of these approvals ahead by 49%. While this represents a slowdown in the rate of growth from Q1, this was to be expected due to weak base effects in Q1 2013. In volume and value terms, mortgage approvals in Q2 were at their highest level since the series began in January 2011.”

Mr O’Leary also said that mortgage lending growth of 30% is expected this year which will help return lending to a “normal” level of around €8bn — far in excess of the €2.5bn lent in 2013.

Both Bank of Ireland (40%) and AIB (34%) last week indicated large year-on-year increases in gross mortgage lending which has contributed to Goodbody’s positive growth expectations.

Meanwhile, the Central Bank yesterday published figures which suggest the banks are reducing the number of modified mortgages in arrears. The stock of permanently modified defaulted loans making full repayments on their modified mortgage has increased to 55% from 28% in the three years to the end of 2013.

Of loans permanently modified in the last quarter of 2012, 60% continued to make full repayment a year later compared to 44% of loans modified in the same period a year earlier.

With 11% of permanently modified defaulted loans consistently making no repayment after modification, the Central Bank warned that more needs to be done before the arrears issue is resolved.