Due to the easing of the central bank’s lending rules and rising house prices, higher loans are taken out
The rise in interest rates is the reason why fewer households opted to refinance their mortgages in the first three months of the year.
But demand for first-time mortgages remains strong, according to new figures from the Banking and Payments Federation Ireland (BPFI), the representative body for lenders.
Due to rising house prices and the fact that first-time buyers can now borrow four times their income, the average loan amount for new buyers has reached its highest level since 2005.
The average first-time buyer was allowed to borrow $292,000 in March 2023, the highest amount since the dataset began in 2005. This is $21,000 more than approved for first-time buyers in March last year.
And the average amount of a second buyer, €326,000, is also at its highest level in 18 years. This is €26,000 more than the average approval for a second buyer last year.
In the first three months of this year, a total of 10,908 new mortgages worth € 2.86 billion were taken out by borrowers.
The number of mortgages taken out with lenders was 10 percent higher than in the same three-month period last year.
And the value of the withdrawals was 14% higher than last year. This is largely due to higher real estate values.
But compared to the last quarter of last year, the number and value of mortgages taken out has fallen sharply. In the last three months of last year, some 13,300 loans were taken out.
This means that in the first three months of this year the number of loans taken out fell by 31 percent compared to the previous quarter.
And the value of loans taken out in the first quarter of this year is down 34 percent from €3.3 billion in the previous quarter.
First-time buyers remain the largest segment of borrowers, accounting for half of all loans.
But switching activity was down 52% in the first three months of this year compared to the last three months of 2022, the BPFI said.
However, continued mortgage activity appears to be strong. In March, 4,520 mortgages were approved, the majority of which originated from first-time buyers. About 2,800 new buyers were approved for a loan last month, or 62% of the total.
But the number of switchers approved for a mortgage in March fell 54% compared to the same month last year.
Davy Stockbrokers economist Conall MacCoille said the numbers show that despite higher interest rates, new buyers are taking on higher debt, suggesting the central bank’s easing of lending rules is having an impact.
BPFI chief executive Brian Hayes said the new mortgage take-up numbers show demand remains strong.
He said homebuyers and movers remain active in the market, with a pullback in switchers and buy-to-let investors.
