Surprise - Mortgage Lending is Down

This week, the Irish Bankers Federation published their Mortgage Market Profile. Unsuprisingly, the Irish mortgage market continues to contract. In my opinion there are two main reasons for this - (1) people are still deferring property-buying decisions due to fear / uncertainty / possibility of further price drops and (2) lending criteria has tightened so much that it's a lot harder to get approved for a mortgage than it was previously.

Here's an extract from the Press Release...

• 3,259 new mortgages issued in Q1 2011 to a value of €577 million
• Home purchasers continue to dominate the market


The IBF/PwC Mortgage Market Profile published today shows that 3,259 new mortgages to the value of €577 million were issued during the first quarter of 2011.

The volume of new lending is down 42% compared to the previous quarter and is down 53.1% on the previous year. While the seasonal pattern of mortgage lending typically results in a lower level of lending in the first three months of the year compared to other quarters, this more pronounced reduction in activity reflects the broader macroeconomic environment.

However, the key home purchaser segments of the market, First Time Buyers and Mover Purchasers, continue to dominate this smaller market. Together they now account for over 77% of the market by value and 67% by volume. In effect, more than three-quarters of all mortgage credit issued now goes to the home purchasing segments of the market.

Lenders generally continue to report subdued underlying demand for new mortgage finance. This has been influenced by uncertainty around macroeconomic developments, property price trends and future interest rate movements. At the same time, lenders continue to point to the need for prudent lending with the all-important focus on the borrower’s employment situation and capacity to repay.

Guide to Dealing with Mortgage Repayment Difficulties

The Irish Bankers' Federation have published a guide containing some basic advice on what to do and what not to do if you experience difficulty meeting your mortgage repayments.

It can be downloaded from their website here.

There may possibly be comments about the irony of the IBF publishing such a guide when it could be argued that practices of some of their members may have contributed to some people's current difficulties, but we are where we are. It's a useful guide nonetheless.

AIB Bank shun switchers; even less competition

I blogged earlier in the month about the closure of Bank of Scotland & Halifax and the negative effect on choices available to Irish mortgage-hunters that this brings.

Now AIB have confirmed that they are no longer open for mortgage switching business, i.e. moving your mortgage from Lender A to Lender B because Lender B offers better rates or a better package.

While AIB's release tells us that their "primary focus for the year ahead will be to support mortgage applications from 'First Time Buyers' and 'Home Movers', I see this move as a bad thing. If other lenders follow suit, Irish mortgage customers are then left in a position where the only way they can move mortgage is to buy another house! Think about it - your lender decides to add 2 or 3% on to your interest rate to boost their own margins and you can do nothing about it because no lender will accept switchers...

Let's hope that not all lenders follow this lead. A market without competition is not a good place to be.

Bye Bye Bank of Scotland

Although banks are generally an easy target for criticism, I'm genuinely saddened to hear of the withdrawal of Bank of Scotland Ireland and Halifax from Ireland, for two primary reasons: -

(1) Bank of Scotland's entry really did shake up the Irish mortgage market. When they arrived here, they undercut Irish banks' mortgage rates across the board and forced the incumbents to compete. The Irish customer won as a result of this competition, through lower repayments.

(2) At a personal level, it's a difficult time for the 740 or so staff who are losing their jobs. This is not a good time to be looking for a new job in banking or financial services and I genuinely wish them well.