KBC Bank Ireland predicts mortgage level upturn

The Irish mortgage remains well below healthy levels but activity is picking up strongly, KBC Bank Ireland has said, adding that it was committed to growing its current 10% share of the home loans market here.

The improvement in the number of loans drawn down was signalled earlier this week in industry figures which raised analysts’ hope the moribund market was at last stirring.

KBC Ireland chief executive Wim Verbraeken said the outlook was increasingly more optimistic with the number of enquiries having risen across its 15 outlets, including those in Dublin and Cork. 

He said the mortgage market appeared to be coming to terms with the Central Bank’s new mortgage lending rules–-the Macro-Prudential restrictions based on household income and property values brought in early last year. 

Mr Verbraeken said the bank understood the reasons the Central Bank had brought in the mortgage lending rule, and it was up to the Central Bank to determine whether the rules were working as planned.

The bank was optimistic about the level of mortgage business it would write through the rest of the year even though activity in the Irish market plagued by shortages of housing supply was still 30% below normal levels. Its second-quarter earnings report showed the Irish bank had substantially decreased the number of distressed mortgage loans, but that €4.6bn of its €12bn home loan book was still categorised as being impaired.

Net profit of the Irish unit more than doubled to €39.5m in the quarter from a year earlier, boosted by a lower level of loan-loss provisions. Parent KBC Group reported an overall profit of €721m in the quarter.

Mr Verbraeken said the home loans book was in better shape than the figures might imply because over half of all impaired mortgage loans was in the lowest level of distress, which would likely in time be classified as ‘performing’ loans. More jobs, an increase in wages and the now steady improvement in house prices provided customers the potential to dig themselves out of negative equity, he said.

The Independent Alliance TDs who entered Government and opposition politicians had highlighted the high number of impaired mortgage loans on the books of all the banks here eight years after the onset of the financial crisis.

Mr Verbraeken said the bank would continue to offer market-leading mortgage and deposit rates and was determined to defend and grow its market share of 10% of the mortgage market, but wouldn’t comment whether the bank would contemplate further rate cuts to fend off any new and existing lenders. The investigation at the bank into tracker mortgages part of an industry-wide redress probe by the Central Bank was still going on, he said, but without providing new details.

The review of the Irish operation by its KBC Group parent would be completed at the very latest in early 2017. That review would determine whether the unit was generating sustainable profits.


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