Category Mortgage News

Easing of mortgage borrowing rules for first-time buyers and ongoing Government supports are underpinning prices, says report

Mon Jul 10 2023 – 05:00

Asking prices for Irish homes picked up in the three months to the end of June following three quarter-on-quarter declines in a row, as the market showed signs of stabilising even as interest rates continued to climb, according to MyHome.ie.

The average asking price for a home increased by 4.3 per cent in the second quarter compared with the first three months of 2023, and are now 2.2 per cent higher than the same time last year, at €325,000, according to MyHome, which is part of The Irish Times group.

That compared to a 0.4 per cent quarter-on-quarter drop in the first three months of the year.

[ Does the Government really want house prices to fall? ]

[ Sherry FitzGerald flags thousands of properties lost to rental market ]

Dublin prices rose 3.3 per cent in the period to the end of June and at an annual rate of 0.6 per cent, according to the latest data. Homes outside the capital increased by 4.6 per cent on the quarter and by 3.5 per cent year-on-year.

The report also points to more realistic pricing by sellers as homes are now being sold for 1.4 per cent over the asking price, on average, down from between 5 and 6 per cent in the middle of last year.

MyHome.ie said prices are being underpinned by an easing of Central Bank borrowing rules for first-time buyers at the start of the year and by ongoing Government supports for people looking to get a foot on the property ladder, as well as a shortage of properties on the market.

This has more than offset the impact of the European Central Bank (ECB) continuing to raise official rates this year. Its main lending rate moved from zero to 2.5 per cent between last July and December, and has since risen to 4 per cent.

“The stabilisation of the market is to be welcomed,” said Joanne Geary, managing director of MyHome.ie. “The Government’s demand-side initiatives and looser Central Bank lending rules appear to be negating the effects of rising interest rates, but we also need to see available properties on MyHome.ie approach the pre-pandemic figure of 20,000 to make a meaningful difference.”

There are currently just 14,000 properties listed for sale on the company’s website.

Conall Mac Coille, chief economist at Davy and author of MyHome.ie’s latest quarterly report, said an overall decline in Irish house prices this year still “cannot be ruled out, given the prospect of further ECB rate hikes”. However, he said an annual drop in values now appears less likely.

“We have left our forecast for asking price inflation unchanged at 1.5 per cent through 2023 but have revised up our forecast for housing completions to 29,500,” he said. Davy previously estimated that completions would fall to 27,500 units this year from almost 30,000 in 2022.

Separately, a new report suggests activity in the Irish construction sector expanded in June for the first time since last September.

The BNB Paribas Real Estate Ireland construction purchasing managers’ index rose to 50.4 in June from 49.4 in May, the company said. A reading above 50 indicates that activity is growing.

John McCartney, head of research at BNP Paribas Real Estate Ireland, said the increase “has been coming for a while, with building firms consistently reporting increased new orders and staffing levels since the start of this year”.

Still, the subsector reading for housing activity was only 48.4, marking a ninth successive month of decline. Mr McCartney said the viability of apartment building amid higher constriction cost and interest rates in recent times “remains challenging” in particular. Still, he expected new home completions to reach 30,000 this year.

Source: The Irish Times 10/07/23

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https://www.gov.ie/en/publication/5568b-housing-for-all-available-supports/

Housing for All – Available Supports, explains in detail how you can benefit from using these schemes to purchase your home.

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We hope this information helps you with your future home plans.

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Property industry says prices will continue to grow as higher interest rates send global markets into reverse

The property industry here insists on Irish exceptionalism. Because of the mismatch between supply and demand, they insist the drag from higher interest rates won’t be enough to trigger a reversal in prices, like the ones we’re seeing in the UK, the United States, Canada, Australia, New Zealand (the list goes on).

In other words, the pressure on prices from the lack of supply is too strong to be trumped by higher mortgage costs (an obvious demand dampener). It’s a big call and maybe the industry is right. We’ll find out in a few months. The latest figures from the Central Statistics Office (CSO) show prices fell on a monthly basis by 0.6 per cent in January, anchoring the annual rate of inflation to 6.1 per cent, down from 7.7 per cent previously.

Year-on-year inflation in Dublin was put at just 4.3 per cent, while prices on a monthly basis in the capital fell by 1.1 per cent. And remember these figures stem from transactions that happened up to three months ago, in advance of the recent spate of mortgage rate hikes from providers here and in advance of the European Central Bank’s planned hikes this month and next. In other words, the dampening effects of higher borrowing costs have still to play out.

Many analysts believe the industry is underestimating the impact of these higher interest rates and that we will soon see a price correction of some sort.

“Some of the forecasts for growth this year seem wildly optimistic,” says Daragh Cassidy, head of communications at price comparison website Bonkers.ie. He suggests the affordability constraint imposed by higher rates will almost definitely send prices into reverse. His rationale is that those borrowing €300,000 over 30 years on a mortgage rate of about 2 per cent – the rate available at the beginning of last year – would have had a monthly repayment of €1,109 a month.

If rates go to say 5 per cent (they’re expected to go to at least 4 per cent) to keep the same monthly repayment of about €1,109, either the amount borrowed or property prices would need to fall by about 30 per cent. That strain on affordability will outweigh the current demand-supply dynamic, he says.

Source: The Irish Times, Thursday 16th March 2023

The level of mortgage drawdowns is now at its highest since the boomtime of the Celtic Tiger era.

Close to 53,000 mortgages were drawn down last year, with a value of more than €14bn, according to the Banking and Payments Federation Ireland (BPFI).

This is the highest number and value of mortgage drawdowns since 2008, the peak of the boom that ended in a property price crash. The number of new mortgages is up 21pc on the previous year.

The number of first-time buyers drawing down a mortgage had now hit levels last seen in 2007, the banking lobby group said in a report on home-lending activity last year.

The BPFI said that, over the past five years, first-time buyers had drawn down close to 108,000 home loans.

A total of 58,276 mortgages to the value of €15.8bn were approved last year, but not all of these ended up being issued, because home buyers could not find a property at a price they could afford.

The surge in the value and number of borrowers comes after a sustained period of double-digit property price growth and close to 30,000 homes being built last year.

In the last three months of 2022 alone, almost 16,000 new mortgages to the value of €4.3bn were drawn down by borrowers.

This is a jump of close to 20pc in the number of mortgages issued, and a rise of 31.5pc in the value of the home loans compared with the last three months of 2021.

First-time buyers are the biggest group getting a housing loan.

They represent almost half (47pc) of the number of drawdowns.

Chief executive of the banking body Brian Hayes said the figures showed what he called a significant number of both drawdowns and approvals, and it was a particularly strong year for first-time buyers.

“Drawdown volumes rose by 21pc to 52,634, while values rose by 34.3pc to almost €14.1bn. These were the highest levels since 2008,” he said.

Mr Hayes added that first-time property purchasers continued to drive the growth.

Around 25,000 of the mortgages drawn down last year were for first-time buyers.

Mr Hayes said the number of first-time buyer mortgages was at its highest level since 2007. It was 26pc higher than in 2008.

By contrast, mover-purchase volumes were 47pc lower than in 2008.

Mr Hayes said: “Looking to the year ahead, we expect housing and mortgage demand to remain strong despite the challenging economic environment.

“Almost 108,000 first-time buyer loans have been drawn down in the past five years and lenders will continue to support customers as they seek to buy or build a home.”

Figures for December show that 3,635 mortgages were approved in that month.

Close to half were for first-time buyers, while movers account for around a fifth of the approvals.

The number of mortgages approved in December fell by 33.1pc in the month when compared with November, and by 5.7pc when last December is compared with the same month in the previous year.

Mortgages approved in December were valued at €996m.

Meanwhile, research undertaken by the Irish League of Credit Unions has found that those considering upgrades to their home are focused on cost savings as well as other factors such as comfort and warmth, and to be more climate-friendly.

The survey of 1,000 people, undertaken by iReach, shows that three-quarters of people who are planning to carry out home energy upgrades are motivated by potential savings to their bills.

Source: Irish Independent. 1st February 2023

Bank of Ireland said today it will increase interest rates for a number of mortgage and deposit products.

It said this follows increases of 2.5% in European Central Bank rates since July of last year.

The bank has announced a 0.75% increase for fixed rates on new mortgages – effective from today.

It also announced a 0.5% increase for the fixed rates available to existing mortgage customers.

This includes customers who are coming to the end of their fixed rate period and are seeking to re-fix their mortgage, and tracker rate or variable rate customers who wish to move to a fixed rate.

Customers who already have credit approval and who draw down their mortgage by February 21 can still avail of the previous fixed rates, it added.

The bank had previously increased its fixed rates for new mortgages in November.

Bank of Ireland today also announced a 0.5% increase for “Regular Saver” personal deposit accounts, which will allow customers earn 0.75% on their “Mortgage Saver”, “Goal Saver” and “Child Save” accounts, capped at up to €15,000.

The increase takes effect from Friday January 27.

The bank also said it will launch a new one year term deposit account for personal customers at 0.5%, which is capped at €100,000.

According to recent Central Bank figures, Irish new mortgage rates are the third lowest in the euro area after Malta and France.

Source: RTÉ News, December 15 2022

The main banks here say they will all be passing today’s ECB interest rate hike on to tracker mortgage customers, but variable and fixed rate borrowers will be spared for now.

There are around 200,000 tracker mortgages remaining in the country, while there are 130,000 people whose loans are on variable rates.

In a statement, Bank of Ireland said its tracker rates will increase by the 0.5% announced by the ECB at lunchtime.

“For most customers, this change will take effect from 10 January 2023,” it said.

“Customers don’t need to take any action right now. Bank of Ireland will write to all tracker mortgage customers confirming the new interest rate, the effective date, and their new repayment amount.”

It added that no decision has been made in relation to other products and all rates continue to remain under review.

It was a similar story from AIB, which said tracker customers will see their rates change in line with their contracts following the ECB action.

While Permanent TSB also confirmed that it will pass on the rate change to tracker borrowers, as per contracts.

Rates on other products will remain under review, a spokesperson added.

Ulster Bank, which has sold many of its mortgages to Permanent TSB, said it would increase the rates on its remaining tracker mortgages, including offset mortgage rates linked to the ECB rate, with the rises due to take effect from January 18.

KBC Bank Ireland said its tracker rates would also rise and all other mortgage rates are kept under constant review.

Pepper Finance, which services thousands of mortgages on behalf of funds, said tracker rates would also rise, but there would be no change to variable rates at present.

“It will have no immediate impact on variable rate customers, and no decisions have been made on passing on this additional ECB increase,” a Pepper spokesman said.

“We are acutely aware this is a challenging time for many people and our team is on hand to help anybody concerned about their ability to meet the payments, with a broad range of solutions which we can tailor to their individual situation.”

Non-bank lender, Avant, said keeps interest rates under review but only comments on a pricing change at the time of a formal announcement to its customers and brokers.

Irish banks have so far been slow to pass on the four rate increases announced by the ECB since July to their customers.

Source: RTÉ News, December 15 2022

THE European Central Bank announced another hike in its key interest rates in a move that will pile more pain on those with trackers and variable rates.

The move is expected to hit those whose mortgages have been sold to vulture funds hardest as they are stuck on variable rates that are the highest in the country.

The main refinancing rate of the European Central Bank (ECB), which is directly linked to the interest rate charged on trackers and influences variable rates, has gone up by 0.5 percentage point.

It is the fourth ECB rate hike since the summer.

Each 0.5 percentage point rise in European rates adds around €25 to monthly repayments for every €100,000 owed on a typical tracker mortgage. Over a year this is €300 in extra repayments.

The cumulative impact of the four rate rises will be close to €3,000 on a typical €200,000 tracker on a 25-year term.

The ECB, which is headed up by Christine Lagarde, has been pushing rates up aggressively in an attempt to rein in prices that have soared in the last year.

The European economies have been under inflationary pressure blamed on the reopening of economies after the Covid-19 pandemic, driven by supply bottlenecks and then surging energy costs due to Russia’s invasion of Ukraine.

The central bank for the 19-country euro zone has raised its key rates four times now.

Economists expect the ECB to continue to hike benchmark rates, but at a slower pace, with inflation expected to be close to a peak and the Frankfurt institution looking to reduce its vast holdings of government bonds.

Pepper, which services around 60,000 mortgages owned by vulture funds, said the new increase in ECB rates will initially only affect tracker mortgage customers, where such increases are automatically passed on as part of their contract.

“It will have no immediate impact on variable rate customers, and no decisions have been made on passing on this additional ECB increase.”

It said it was “acutely aware this is a challenging time for many people and our team is on hand to help anybody concerned about their ability to meet the payments, with a broad range of solutions which we can tailor to their individual situation”.

Mortgage servicers such as Pepper and Start and the funds that own the loans have been heavily criticised for passing on all four ECB rate rises in full in most of their customers.

These mortgage holders are typical stuck on variable rates as they servicers and vultures will not offer them the option of fixing their rates.

And most of those whose mortgages are owned by vultures are unable to switch lender as many have been in arrears in the past, or have a split mortgage, which part of the loan is put aside with repayments being made on it at a later date.

People whose loans were sold have already seen their rates go as high as 6.5pc, with some now at 7pc.

They have no option to fix, prompting consumer advocates to say they are “mortgage prisoners”.

Latest figures from the Central Bank indicate that there are just under 200,000 mortgage accounts on a tracker rate.

Another 150,000 or so are on variable rates.

Tracker rates are hit every time there is an ECB rate rise. The main banks have not increased their variable rates, but non-bank lenders and vulture funds have been pushing up variable rates.

Source: Irish Independent, December 15 2022

House prices could fall 12pc by the end of the decade if the Government was to meet its housing target and build 35,000 homes a year.

To achieve it would require more public money, higher numbers of foreign construction workers and more domestic workers moving from commercial to residential projects, a report by the Economic and Social Research Institute (ESRI) said.

“The issue is we do need to increase and find these workers,” said ESRI research professor Kieran McQuinn, one of the report’s authors.

“Increasing housing activity is clearly required in the domestic economy given the imbalance observed between the structural demand for housing and the actual supply. Definitely some realignment is going to take place between commercial and residential.”

The ESRI estimates the Government will miss its annual housing targets by around 10,000 units a year to 2030.

That means it would complete around 25,000 new dwellings a year instead of a targeted 35,000.

Meeting the 35,000 a year target would take the heat out of the housing market while increasing construction wages by 1pc by the end of the decade, the ESRI found.

ESRI analysis shows overall investment in home building has not recovered since the financial crisis, and is less than half the size it was in 2000, as a proportion of overall construction.

Investment in “other building and construction” – which includes commercial real estate but excludes home improvements – is now back to Celtic Tiger levels.

That means the number of new workers required “may not be as great” if some are redeployed from the commercial sector, the report said.

The study found the movement of foreign construction workers into the country has been “minor” compared to sectors such as IT and manufacturing since the 2008 crash.

In 2016, there were high numbers of French, German and Indian workers in IT, manufacturing and healthcare, with a proportion also in scientific and technical jobs.

Except for Romanian workers, the number of non-Irish workers in construction was negligible that year.

However, the study acknowledged the “high cost of housing itself can prove a challenge in attracting migrants” and migration “will put further upward pressure on house prices in the short term”.

The ESRI is calling on the Government to consider adding construction to its “critical skills” list for visas, and says a better use of vacant properties, modular housing and land market reform could help boost completions.

It said more public funding is needed, as the growth of new bank lending for construction has slowed faster than other sectors.

The study comes at the same time as a slowdown in housing starts and in overall building activity.

Residential building activity fell 16.2pc between July and September, compared to the previous three months, while housing commencements have slowed by about 10,000 since the first three months of the year.

The Government is on track to beat its house building target this year but to miss it in 2023.

Population growth over the last five years has risen at around three times housing stock, figures from the Banking and Payments Federation of Ireland (BPFI) show.

Increasing demand means house prices could continue rising without a “substantial increase in supply”, the BPFI said this week.

Annual house price growth slowed to just under 11pc in September, from a high of over 15pc earlier this year. But rental costs are surging, and are up by about 85pc over the last decade, the BPFI said.

Source Irish Independent 9/12

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