Home loans slump to 10-year low

The squeeze on first-time buyers has intensified as the amount of home loan credit has shrunk to the lowest level for 10 years, official figures show.

Analysts say that Europe’s most expensive home loans — for both variable and fixed-rate loans — and new restrictions on access to mortgage loans — is keeping a lid on home loan credit.

Central Bank figures published yesterday were for up to the end of March and showed that the amount of home loan credit available in standard variable rates is still rising — posting its 13th quarterly increase in a row. The amount outstanding for tracker rate loans has declined for the 14th successive quarter, while mortgages fixed for over a year rose by almost 12% in the early part of the year after huge falls in the previous 12 quarters.

But the overall amount available for households to buy homes has shrunk for the 21st straight quarter to €77.5bn, the lowest amount for 10 years.

Consumer groups and the Government have strongly criticised the banks for charging hard-pressed households some of the most expensive standard variable home loan rates in Europe, of up to 4.5%. Finance Minister Michael Noonan has insisted that the banks, by next month, must offer all their customers — existing and new customers — a suite of more competitive variable and fixed rates mortgages.

However, the Central Bank figures to the end of March still show that banks here — including AIB Mortgage Bank, AIB’s EBS Mortgage unit, Bank of Ireland Mortgage, Permanent TSB and KBC Bank Ireland — are lending significantly lower amounts for home loans at a time when the economy is growing strongly.

Though the decline has slowed, the Central Bank said the total amount of credit available for home loan credit excluding loans securitised by domestic banks stood at €77.5bn at the end of March. That’s down from €77.3bn at the end of last year and compares with the €109.4bn available in the same quarter five years ago.

“I am still to be convinced that the banks here will cut their variable rates,” said Michael Dowling, a leading mortgage and debt adviser.

“Fixed rate mortgages here never accounted for more than 10% of the market here and people are reluctant to tie themselves into long-term loans.”

Loans available for buy-to-let or landlord homes have shrunk to €16.4bn, compared with €17.2bn at the end of last year and down from the €28.6bn five years ago. Such loans to landlords have declined for 14 straight quarters.

Meanwhile, the Central Bank said household deposits had increased for the second successive quarter in Irish banks, to €86.6bn, at the end of March 2015. That’s an increase of €450m from the previous quarter, but the bank provided a health warning, saying that reclassifications following sale of loans have affected the deposit figures in the past.