Mortgage approvals for house purchase rose by 20% year on year (yoy) to a record high in October, as the Irish housing market continued its rebound from the lockdown period. First-time buyers are leading the charge, with the number of approvals up 31% yoy, according to data from the Banking and Payments Federation of Ireland (BPFI).
The Central Bank noted last week that the banks initially reacted to the COVID-19 shock by restricting access to exemptions from the loan-to-value and loan-to-income limits. Given the more resilient performance of the market over recent months,
Goodbody Stockbrokers say it is likely that banks have loosened up on this aspect, thus contributing to the rebound in September and October.
With lending with an allowance accounting for only 16% of total up to the end of October, there is capacity for banks to provide mortgages using an allowance, providing support for the market at the end of 2020. Many of the recent approvals will also be carried into 2021, subsequently boosting drawdown data in the first quarter of next year.
An ongoing surge in savings is playing a role in trends in mortgage approvals as prospective homeowners can achieve deposit targets sooner. A considerable spike was evident in the October data for household savings, showing a record increase of €13bn. Another contributing factor here is the expansion of the Help-to-Buy scheme for first-time buyers in the new homes market, where the entire deposit is potentially provided by the State.
According to Goodbody Stockbrokers, "The income levels of those most affected by ongoing restrictions is a third factor that explains the more resilient performance of the mortgage market."