Brokers predict €4.7bn in new home loans in 2016

The country’s largest mortgage-selling group has forecast a rise of only 5% in home-loan lending next year, suggesting the modest interest-rate cuts by lenders will do little to lure first-time buyers into the market.

In new figures prepared for the Irish Examiner, the Association of Expert Mortgage Advisors projects new mortgage lending will rise to between €4.2bn to €4.5bn this year, up from €3.85bn in 2014, and will increase to only €4.7bn in 2016. The numbers suggest the new Central Bank controls that limit the amount of home-loan credit to individual borrowers are biting hard at first-time borrowers, the lifeblood of the market.

Mortgage lending hit a trough at the height of the banking crisis in 2011, when lenders advanced just €1.8bn in new loans, compared with €40bn in 2006.

Permanent TSB yesterday met a July 1 deadline imposed on lenders by Finance Minister Michael Noonan to reduce mortgage costs by announcing a new product “suite” of standard variable rates.

The cost of its home loans will now depend on the equity and loan amounts, but its highest rate — including an offer for borrowers in negative equity — represents only a modest cut to 4.3% from 4.5%.

It is understood Ulster Bank, which offers one of the most expensive rates, will announce lower rates in the coming days. AIB remains the cheapest, at 3.9%, but KBC Bank Ireland is competing “aggressively” with a variable rate of 4.1%, said Ken Murray, director of the Association of Expert Mortgage Advisors.

“It means that the new, average Permanent standard variable rate will be 4.2%,” said Mr Murray. “The Permanent rate will fall from being the most expensive, with Bank of Ireland, in the market, at 4.5%, to the third most expensive.”

The move by Permanent TSB to offer lower rates is welcome, but many question how many of its existing borrowers will apply.

Fianna Fáil finance spokesman Michael McGrath said the response by the banks to the July 1 deadline was “totally inadequate”, adding that “the banks have dropped a few crumbs from the table” and variable rates here remain the highest in Europe.

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