New data from the Banking and Payments Federation of Ireland (BPFI) suggest that while drawdowns remained weak, there has been a V-shaped recovery in mortgage approvals with the number of approvals for house purchase up 27% year on year (yoy) in September.

The number of approvals in September 2020 is the second highest in the 10-year history of the data. The growth is led by first-time buyers (+34% yoy), but approvals for movers (+19% yoy) also grew strongly in September.

Along with the growth in volumes, higher value mortgages were approved in September, such that the value of approvals for house purchase grew by 39% yoy, with the value of first buyer approvals up by 48%.

Goodbody Stockbrokers believe that the increase in the size of the average loan is likely due to a change in the mix of mortgage applicants, with higher earners more likely to be relatively unaffected by the weaknesses in the labour market to date.

Goodbody say these potential buyers have also been mobilised by the increased prevalence of working from home, where Ireland has had among the highest incidence in the EU.

Although mortgage drawdowns continued to decline heavily in third quarter, the outturn is better than our expectations once again. The volume of drawdowns for house purchase fell by 33% yoy in Q3 (-37% yoy in Q2), with all components falling sharply. First time buyers drawdowns fell by 30% yoy, while mover drawdowns fell by 37% yoy.

According to Goodbody Stockbrokers, "Trends in approvals and drawdowns are usually quite close, but a gap may open up in the coming months due to: (i) caution on sanctioning drawdowns for those whose firms may be on government support in the second lockdown and; (ii) an unavailability of properties for sale. Despite these concerns, the housing market is proving more resilient that we originally thought, and we will be upgrading our mortgage estimates again as a result."

Source: www.businessworld.ie