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Mortgage lending growth strong in Q2

Tuesday, August 12 10:20:44

The Irish Banking Federation has just published its latest mortgage drawdown statistics for the second quarter of this year showing a continuing rise in draw-downs.

The statistics reveal volume growth of 49pc year-on-year (yoy), with the value of drawdowns up 58pc to E820m.

This follows growth rates of 66pc and 72pc yoy respectively in Q1, a quarter that was flattered by the weakness in Q1 2013 caused by the ending of the mortgage interest relief at the end of 2012. The continuation of the strong momentum into Q2 is indicative that the recovery in the mortgage market is taking hold, albeit from a low base.

First-time buyers continued to account for the majority (51pc) of activity in the second quarter of the year (same as in Q1). The volume of mortgages issued to FTBs grew by 53pc yoy (+87pc yoy in Q1). Similar trends were evident for mover-purchasers (up 48pc yoy, after +57pc in Q1). Together these two categories accounted for 86pc of the loans drawn down in the second quarter of the year (unchanged from Q1).

Although the investor mortgages drawn down remains at very depressed levels, there have been some signs of recovery over recent quarters. In Q2, investor mortgage drawdowns grew by 79pc yoy (similar rates to the +74pc yoy in Q1). While the lending conditions continue to be tighter for these types of purchasers, further growth is likely over the coming quarters.

The average loan size grew by 6.5pc in Q2, slightly less than the 11pc yoy house price growth achieved in the quarter though accelerating from the +4pc yoy growth rate recorded in Q1. Price growth should lead to some loosening of lending standards at the banks, though we have not seen any material signs thus far; the most recent Bank Lending Survey from the Central Bank in July reveals that while mortgage demand has increased since Q1 2013, lending standards remain unchanged, having tightened considerably over the crisis period.

"We were previously anticipating total gross mortgage lending growth of 35pc in 2014, but these numbers are ahead of our expectations. As a result, we are now forecasting loan growth of 50pc in value terms, bringing the total market to E3.75bn for the year. While this will be the largest amount of mortgage lending since 2010, we believe this is just half of a "normal" level of lending," said Goodbody Financials.

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