Lending levels slip to state not seen since early 1970s

THE number of mortgages given out by banks this year is expected to fall to levels last seen in 1971.

The Irish Mortgage Corporation said figures indicate as few as 11,000 mortgages could be granted this year for residential properties.

A survey by the Professional Insurance Brokers Association (PIBA) found that more than 42% of brokers say that between 60% and 80% of mortgage applications were declined by lenders in the first three months of this year.

Director of the Irish Mortgage Corporation, Frank Conway, said Ireland is at risk of originating fewer mortgage units than at any point since the early 1970s.

The IBF/PwC mortgage market report shows that 2,325 mortgages were granted for property purchases in the first quarter.

“Depending on how this year pans out, we will be lucky to surpass 11,000 mortgage units for the purpose of a property purchase,” said Mr Conway. “This includes first-time buyers, trading up and investment property purchases.”

However, he said the first quarter is typically the poorest, as the number of mortgages can be 15% to 20% below the year’s average.

“Regardless of which way we slice the stats, it looks like 2011 is presently on course to match the early 1970s in terms of mortgage originations. Back then, and in the intervening years, we had a lot fewer people in the country and, in some years, a lot worse economy.”

Mr Conway said the ongoing problems in the mortgage market is largely becoming one of funding.

“In recent months, we have seen an uptick in consumers coming to the market to explore their options of securing mortgage finance.

“For the first time, while property prices and employment remain a concern, the crisis in bank funding is coming to the fore as a central block to those who now wish to purchase,” he said.

Director of PIBA mortgage services Rachel Doyle said the property market is virtually stagnant.

“The absence of a normal functioning banking system is continuing to stymie any underlying demand. Brokers are reporting that this, along with the related concerns about the IMF/ECB bailout, is depressing consumer sentiment.”

The survey found that the main reasons for mortgage refusals are related to job security — either the applicant has not been in current employment for sufficient time or their employment is a fixed contract rather than permanent.

In terms of the average length of time taken to close a loan application, more than 90% of brokers say it is now taking at least three months to complete, with almost one-third saying it takes longer than four months.