Mortgage expert blames rules for ‘dysfunctional market’

The Irish mortgage market is “dysfunctional”, a leading mortgage broker said yesterday, squarely putting the blame on strict new Central Bank home-lending controls.

Michael Dowling, chairman of mortgage software provider Mortgage Brain, also said that banks were offering too few negative equity mortgages, with only 300 transacted last year, and that they were “not fit for purpose.”

It comes as Davy Stockbrokers published a major report that showed that home loan lending may fall short of the amount the broker had anticipated this year, as the Central Bank’s lending rules start to take effect.

The broker predicts that the overall new mortgage lending will now be less than €4.2bn this year.

“In my 25 years in the mortgage market, I have never experienced such a dysfunctional mortgage market,” said Mr Dowling.

“We have five banks lending, but their hands are tied by the new Central Bank rules on lending.

“The mortgage market in Ireland will be [worth] €4bn to €4.2bn in 2015. Manchester and the greater Manchester area alone will lend more money this year than Ireland.

“We have the fastest- growing economy in Europe, unemployment is falling, exports growing and our national debt is under better control but we are not providing enough homes for those who would like to buy and at the extreme end, homelessness is growing.”

Mr Dowling squarely put the blame on the new Central Bank lending rules, saying that “no market introduced two significant changes the way [Ireland] did in February this year, namely a reduction in LTV, loan to value, and a reduction in LTI, loan to income”.

He said the rules mean that first-time buyers buying a new home for €325,000 will need a deposit of €48,000 and a couple borrowing €284,000 would need a total household earnings of €81,100. That compares with the Irish industrial wage of €36,000, he said.

Stress tests are making matters worse, Mr Dowling said.

Meanwhile, the Davy report said that the latest Central Bank lending figures suggest that new mortgage lending in the third quarter “was still relatively strong, despite recent weak mortgage approvals data” and that about €3.2bn in new loans has been advanced in the first nine months of the year.

However, it projects that total lending may fall short of its projection of €4.2bn in new mortgage lending for all of 2015.