Mortgage approvals rise 8.7% in May

The number of mortgage approvals increased again last month, pointing towards a recovery in lending that could stretch into the second half of the year.

Mortgage approvals rise 8.7% in May

In May, they rose by 8.7% year-on-year and by 16% month-on-month. 2,675 mortgages were approved per month, on average, in the three months ending May, according to new figures released by the Banking and Payments Federation Ireland (BPFI).

Of these, 55% — or 1,440 — were loans taken out by first-time buyers, while mover-purchasers accounted for 775.

A second, consecutive monthly rise in mortgage approvals provided evidence that the initial impact of the Central Bank’s macro-prudential lending rules may be waning.

“Mortgage approvals continued to strengthen in May, providing support to the view that the hangover in the aftermath of the macro-prudential rules may be starting to wear off.

"Base effects continue to play a role in the annual comparisons, as approvals fell off significantly after the introduction of the macro-prudential rules at the start of 2015.

“However, two months of improvement does provide room for optimism, with regard to a return of new mortgage-lending growth in Ireland in the second-half of this year,” Goodbody chief economist, Dermot O’Leary, said.

The Central Bank is accepting submissions to its review of the controversial mortgage rules, which were introduced in February, 2015 to limit risky lending and prevent another collapse of the property sector.

While the purpose of the rules has been largely accepted, the restrictions have drawn the ire of representative bodies and of politicians who feel they have locked first-time buyers out of the market.

The Professional Insurance Brokers’ Association (PIBA) said the data released yesterday marked an improvement in lending conditions, but warned that the overall level of borrowing remained far lower than ‘normal’ levels.

“The supply and lending restrictions continue to prevent many first-time buyers, primarily in their 20s and 30s, and living in urban areas, from buying their first homes, but it is also impacting the wider economy,” PIBA chief operations officer, Rachel Doyle, said.

“In many cases, people are now paying rents that are higher than mortgage repayments would be,” she added.

A lack of suitable housing, coupled with what Ms Doyle referred to as the Central Bank’s “excessive” lending rules, are the two factors depressing mortgage lending.

Ms Doyle predicted that mortgage lending could total €5bn for the year, short of the €8bn to €10bn that would constitute ‘normal’.

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