In July, there was a significant 22% increase in the number of new buyers who were approved for borrowing compared to the previous year. This growth is notable considering the recent surge in mortgage rates due to successive European Central Bank rate rises and the ongoing cost-of-living crisis that is putting pressure on consumer budgets. Despite these challenges, the approval numbers for new buyers have remained strong.
However, there has been a 10% decline in the overall number of mortgage approvals, largely due to a collapse in the number of switchers. The Banking and Payments Federation Ireland (BPFI) has attributed this decline to the higher mortgage rates, particularly from non-bank lenders, which have made switching mortgage providers less appealing.
In July, a total of 4,747 mortgages were approved by banks, with first-time buyers accounting for 2,918 of these approvals. This means that six out of every ten mortgages approved were for first-time buyers. Mover-purchasers accounted for 1,148 of the approved mortgages, representing 24.2% of the total.
The value of approved mortgages in July amounted to €1.35 billion, with first-time buyers accounting for €837 million and mover-purchasers accounting for €391 million. The overall value of mortgage approvals remained the same month-on-month but experienced a 6.7% decrease year-on-year.
Despite the decrease in switching activity, the number of new-buy activity has been bolstered by the State’s Help to Buy and First Home schemes, as well as banks offering lower-rate “green mortgages” for newly-built homes.
In terms of average mortgage amounts, first-time buyers were approved for an average of €287,000 in July, which is €10,000 higher than the average for the same month the previous year. This increase reflects the rising property prices.
Ali Ugur, the chief economist of the BPFI, has noted that the mortgage approval figures indicate strong activity among first-time buyers despite the overall market slowdown. He highlighted that this is the fifth consecutive month where first-time buyer mortgage approvals have seen year-on-year growth. There were nearly 30,000 first-time mortgages approved, amounting to almost €8.4 billion, in the 12 months leading up to July 2023, which is the highest annualized level since data collection began. Together with the Help to Buy applications reported by the Revenue Commissioners, the approval figures demonstrate a robust pipeline for first-time buyer mortgage drawdowns.
In the past year, mover-purchase approvals reached a value close to €3.9 billion, the highest since the data series began. However, this increase is partly attributed to rising average mortgage values, with the average mover-purchase approval surpassing €340,000 for the first time in July 2023, at €340,957.
Overall, there were 55,246 mortgage approvals valued at €15.4 billion in the year leading up to July. The European Central Bank rates have increased nine times in the past year, leading to a rise of around 1.5 percentage points in fixed rates offered by the three main banks. As a result, the average interest rate on new mortgages in Ireland has reached its highest level in years, currently at 4.04%. This rate is predicted to rise even further in the coming months and is the second-largest increase in the Eurozone.
In conclusion, while the mortgage market may be facing challenges such as increased rates and a cost-of-living crisis, the approval numbers for new buyers have remained strong. The decline in overall mortgage approvals can be attributed to a decrease in switching activity. The government’s assistance schemes and the availability of lower-rate mortgages for newly-built homes have contributed to the growth in new-buy activity. The average mortgage amounts for first-time buyers and mover-purchasers have also increased, reflecting the rising property prices.
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