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Mortgage market growth constrained by lack of supply

Written by Robert McHugh, on 3rd Aug 2021. Posted in Ireland

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The latest mortgage statistics from the Banking and Payments of Federation of Ireland (BPFI) show that while mortgage drawdowns in the second quarter of 2021 are well up on the lockdown lows of a year ago, mortgage approvals are up by a much greater extent, suggesting that lack of supply is a constraint, and pushing up prices at the same time. 
 
The volume of mortgages drawn down for house purchase grew by 48% year on year (yoy) from a weak base in the second quarter of  2020. On a two-year comparison, the volume of mortgages for house purchase fell by 7%, a worsening on the first quarter of 2021 performance (+9%). Due to growth in the average loan size, the total value of mortgages drawn down for house purchase in the second quarter was just 3% below levels of two years ago. Including remortgaging and top-up mortgages, the value of mortgages drawn down amounted to €2.23bn.
 
The BPFI provide a breakdown of mortgage drawdowns between new and second-hand homes. This shows that the new homes market underperformed in the second quarter. The number of mortgages for house purchase fell by 12% relative to the second quarter of 2019, compared with a 5% decline for second-hand homes.

Over the past 12 months, less than 9,000 mortgages were drawn down for new homes. This compares to the c.21K new home completions over the same period. While some sales to private households may be through cash, this shows that less than half of homes built are for the private market. Non-household purchases, including for Approved Housing Bodies (AHBs), government and PRS make up the rest of the supply. Goodbody Stockbrokeers say the increase in housing starts, if sustained bodes well for an increase in mortgage lending for the new homes market over the coming twelve months. 
 
According to Goodbody Stockbrokers, "While mortgage drawdowns for house purchase in Q2 were lower than two years ago, mortgage approvals were 5% higher. June was particularly strong, up 13% on a two-year comparison. First-time buyers continue to lead the way, up 18% in June. A gap is opening between the level of drawdowns versus approvals recently. In the last twelve months, the ratio of drawdowns/approvals stood at 73% compared to an average of 84% over the past ten years. With the stock of homes for sale at a record low, an absence of available properties is likely to be contributing to this trend."

Source: www.businessworld.ie  

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