New mortgage lending ‘to rise to €10bn’ next year

New mortgage lending will rise to €10bn next year but the loans market will remain constrained because too few new homes are coming on stream, a leading mortgage expert has said.

Michael Dowling, chair of the mortgage committee at industry group the Irish Brokers’ Association, said lenders will sell between €7.5bn and €8bn in new home loans this year and €10bn next year, reflecting the gradual pickup of housing supply, mainly for first-time buyers.

Almost €6bn of new mortgages were sold to the end of August, figures show.

The growth of the mortgage market in subsequent years will depend on the numbers of new homes that will be built, Mr Dowling said.

Most of the new lending will be driven by first-time buyers although there is a “significant number” of buyers who are still using cash and do not need to tap home loans.

Mr Dowling said that there was still room for banks to cut mortgage rates but he expected that AIB — which has been the most active in the market in cutting rates for over a year — will likely have to take the lead again before some rival lenders cut their rates.

He said he favoured controls over mortgage lenders using marketing “gimmicks” in publishing home loan rates with promotions such as cash-back offers because it only obscured the real costs of lending for borrowers.

The Central Bank is carrying out a consultation over transparency measures in the mortgage market, part of an initiative to encourage home-borrowers to switch mortgage lenders.

Meanwhile, interest rates banks charge for home buyers and businesses remain among the highest in Europe, the latest official figures show.

New Central Bank figures show that the average rate for new variable rate mortgages was 3.37% in August.

At 3.29%, the average cost of both variable and fixed rates was significantly higher than the eurozone average of 1.86%.

The bank said over half of all mortgages sold this year were fixed-rate loans.

For business loans of up to €1m, the figures show only small decreases in the last two years. Business loans have fallen to 4.28% from 4.34% a year ago and were down from 4.97% in 2016.

Neil McDonnell, chief executive of business group Isme, said SMEs faced paying even more expensive loans.

The margin for the risk premium applied to Irish SMEs was up to 3 percentage points compared with 1% elsewhere in the eurozone, he said.

The “issue for us is not just the headline figures but the terms and conditions which are exceptionally onerous”, he said.


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