Mortgage activity slows as more rate hikes expected 

There were 4,766 mortgage approvals in June, a drop of 20% compared to the same month last year, new figures show

While overall mortgage activity is slowing down, first-time buyers remain active, with mortgage approvals growing compared to last year despite interest rates increasing by 4% in that time. Picture: iStock

The number of mortgage approvals and drawdowns have fallen sharply as repeated interest rate hikes from the European Central Bank (ECB) make borrowing more expensive, new banking industry figures suggest.

However, while overall mortgage activity is slowing down, first-time buyers remain active, with mortgage approvals growing compared to last year despite interest rates increasing by 4% in that time, with more hikes expected after a meeting of the ECB on Thursday.

Another increase of 0.25% is expected as the ECB attempts to get inflation down to its 2% medium-term target. Inflation in Ireland stood at 6.1% in June. 

In addition, the US Federal Reserve is expected to also raise its interest rates by 0.25% on Wednesday.

According to figures from the Banking and Payments Federation Ireland (BPFI), there were 4,766 mortgage approvals in June, a drop of 20% compared to the same month last year. 

While first-time buyers approvals increased 12.6% to 3,013 in June, mover-purchaser approvals dropped by 7.7% to 1,094, while remortgaging/switching activity dropped 83.2% to 300.

Mortgages approved in June were valued at €1,356m, which is down 18.6% year-on-year.

The BPFI data also included the mortgage drawdown activity between April and June which is also down compared to the same period in 2022.

A total of 9,896 new mortgages, valued at €2.76bn, were drawn down by borrowers during those three months — a drop of 17.4% in volume terms and a 11.9% drop in value terms.

First-time buyers

The number of first-time buyer mortgage drawdowns dropped by 0.4% to 5,971 but the average value increased to €284,397 — the highest level since the data series began in 2003.

BPFI chief executive Brian Hayes said mortgage drawdown volumes fell year-on-year for the first time since slowdown due to covid in late 2020.

“While much of the decline reflects much lower levels of switching, first-time buyer mortgage volumes fell on a year-on-year basis for the first time since 2020.

First-time buyers accounted for almost 82% of home mortgage drawdowns on new properties and 70% of secondhand properties. 

The biggest drops in mortgage drawdown activity was seen in remortgaging/switching down 63.8% compared to last year at 959. Mover-purchaser drawdown activity dropped 12.6% to 2,163.

Mr Hayes added it was “too early” to say if first-time buyer growth would return over the coming months but there were 8,600 such mortgages approved between April and June valued at almost €2.5bn “so there is a strong pipeline for drawdowns later in the year”.

With another ECB rate increase expected, demand for loans among companies in the eurozone plunged by the most on record between April and July — a clear signal the ECB’s year long campaign of interest-rate hikes is feeding through.

The drop, which was “substantially stronger” than lenders expected, came alongside a further decline in demand for mortgages and other consumer borrowing, according to the ECB’s Bank Lending Survey.