Mortgage lending expected to grow 30% this year

Gross mortgage lending is expected to grow by around 30% this year, but house price inflation is set to grow in tandem.

New figures published by the Banking & Payments Federation of Ireland show strong year-on-year growth for mortgage approvals in July. Overall approvals were up 17% on the same month last year, with 3,970 granted at a combined €853m.

That value was up 23.3% year-on-year. Approvals for first-time buyers rose 21.4%, to just over 2,000, year-on-year.

There was a 14.5% rise in mover-purchaser mortgages approved, accounting for nearly a third of July’s approvals. Re-mortgage/switching approvals rose by over 15%, on an annualised basis, last month.

“Mortgage approvals continued to grow at a robust pace in July, albeit at a slower clip than in recent months. A key takeaway [from the latest data] is that the number of approvals for first-time buyers continues to exceed the addition to the housing stock, thus ongoing price inflation is inevitable as this money chases a limited amount of properties,” according to Goodbody chief economist Dermot O’Leary.

“We are forecasting 30% growth in gross new lending this year. Although there is a gap opening up between approvals and drawdowns, due to limited supply, this looks achievable at this stage and will contribute to net lending growth in the banking system for the first time in eight years in 2017,” he added.

July, however, saw month-on-month falls — with overall approvals down by just over 8% on June’s levels; and first-time buyer approvals down nearly 12%.

Meanwhile, UK figures showed consumer credit growth hit a more than one-year low in July; slowing from 10% to 9.8% — its weakest increase since April 2016. The Bank of England said 68,689 mortgages were approved in Britain in July, compared to 65,318 in June.

Earlier this month, the bank said it expected UK mortgage approvals to average around 66,000 a month over coming quarters.

But the value of mortgage lending increased by only £3.6bn in July, slowing from £4.13bn in June. The economy has had its slowest start to the year since 2012, as consumers come under pressure from a rise in inflation.

Additional reporting Reuters