The latest figures from the Banking and Payments Federation of Ireland (BPFI) shows that while the decline in mortgage drawdowns was not as bad as feared in the second quarter, applications continue to be weak, suggesting that the full impact on the market is yet to be seen.
The figures show that mortgage drawdowns fell by 35% year on year (yoy) in the second quarter. While this is clearly a large decline, Goodbody Stockbrokers say it must be seen in the context of an economy that was effectively in lockdown for most the period.
All categories of lending fell substantially over the period. There was also no difference in trends between new and second-hand homes, which saw declines of 37% yoy in volume terms in the second quarter of 2020.
Most of the mortgages drawn down in the second quarter would have been approved prior to the pandemic. Mortgage approvals for house purchase fell by 54% yoy in June (-67% yoy in May, -51% yoy in April), resulting in a 58% yoy decline in the second quarter overall.
Mortgage approvals have fallen by a greater extent than mortgage drawdowns, suggesting that the impacts of the pandemic will continue to linger in the coming months.
According to Goodbody Stockbrokers, "Our forecasts, published in May, assumed a near cessation in mortgage activity in Q2 2020 (-80% yoy). This was clearly too aggressive an assumption. We have thus revised our mortgage forecast upwards to €6.9bn, up from €5.7bn previously. However, this would still represent a decline of 28% on 2019 levels. For 2021, we are now forecasting a mortgage market of €7.7bn (+12% yoy)."