Irish mortgage lending in shock decline in Q1, 2012

This afternoon, the Irish Banking Federation (IBF), which claims to represent banks which account for more than 95% of all mortgage lending in Ireland, has released its mortgage approval statistics for the three months ending 31st March 2012. They figures show a substantial decline from what was already a low base and confirm that the mortgage market in Ireland is moribund. In total, just €450m was approved in new lending in Q1, 2012, down 96% from peak in Q3, 2006 and down 30% from Q4,2011 and if you believe there is any seasonality to lending in the Irish market, then the value of lending is down 22% from Q1, 2011. Absolutely dreadful results, and one might ask where is Bank of Ireland’s commitment to advance €1.5bn in new mortgage lending in 2012.

 

With respect to volumes, just 2,213 loans were approved for true home purchase in the quarter, plus there were 447 remortgages and top-ups. This volume is down 31% from Q4,2011 and 5% from Q1, 2011 and a staggering 93% from the peak in 2006.

 

With respect to average values of mortgages, the picture here is more stable but as we don’t have information about loan-to-values, we are unable to make any deduction as to the price of purchases. The average first time buyer mortgage was €164,000 in the quarter, up from €160,000 in Q4,2011 but down from the peak of €252,000 in 2008. The average mover mortgage was €208,000 down from a peak of €272,000.

 

Commenting on the latest data, Pat Farrell, IBF Chief Executive, stated “we have consistently pointed to the need for close examination of activity over a series of quarters before calling any sign of recovery in the mortgage market.  In this regard the reduction in Q1 activity reflecting traditional seasonal factors – while following as it does three successive quarters of growth – cautions against any definitive view on market direction at this juncture.  However, it is interesting to note that, at 4.7%, the year-on-year reduction in activity in the all-important home purchaser segments of the market is considerably less than the 19.3% reduction in overall market activity.”

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The €100 Household Charge – it hasn’t gone away even though less than 51% of homes have registered

In advance of the referendum on 31st May, there appears to be a temporary lull in talk of austerity, at least talk by the Government. It almost feels like being back as a child at home when there are visitors, and you have committed some real or imagined transgression and you know as soon as the visitors leave, you’ll be in for a leathering. And the anxiety is that as soon as the referendum is out of the way on 31st May, we won’t be able to escape wall-to-wall coverage about household charges, septic tank registration fees, fines, prosecutions and the results of the expert group looking at charging structures for a new property tax in 2013 – the only certainty is the commitment with the IMF which states in the Memorandum of Understanding (page 83) there will be “an increase in property tax.”

But what about the household charge for 2012? Minister for the Environment Community and Local Government, Phil Hogan appears to have gone to ground in recent weeks. You might even have forgotten what he looks like,  here’s a reminder

Remember the push to maximise the number of households registering for the new charge/tax in the weeks leading up to the payment deadline of 31st March 2012? Remember the dark talk of council officials being sent around to rap on your doors, of prosecutions and fines, of withholding tax clearance certificates? Don’t worry it will all come back to you after 31st May. For the time being though, Minister Hogan responded to a series of questions in the Dail this week which reveal the scale of non-payment of the charge and indeed call into question some of the claims made by officials in March and April.

According to Census 2011 there are just over 2m dwellings in the State. Some dwellings, mostly public authority rented housing will be exempt but that is understood to be about 150,000 dwellings and secondly there will be waivers for some households, mostly those in receipt of mortgage assistance and some people on unfinished ghost estates.

The Minister stated that so far, to the 14th May 2012, there have been 939,422 “declarations”, of which 16,360 have registered for a waiver meaning that some 923,062 households “registered for payment of the charge equating to some” €93m. Be careful with the Minister’s words, because it is understood that more than 135,000 of these households have registered to pay by four quarterly instalments – by 13th March, 14th May, 13th July and 10th September. So not all of this €93m has been received in cash yet, and some people who have paid the first instalment may decline to pay subsequent instalments.

So on the face of it, 939,422 homes out of about 1,850,000 homes have registered. That’s 50.8% of which at least 7% are apparently paying by instalments.

You might recall claims on 1st April that “An estimated 805,569 properties were registered for the €100 charge by the time the deadline passed. 1.6 million households are liable for the tax.” indicating that the psychologically important 50% had been exceeded – 50.4% in fact. Six weeks after the deadline it would appear 50.8% have registered and it may well be that some of the instalment payers don’t pay further instalments.

We also learned that of the 939,422 “declarations” to 14th May 2012, that 94,000 are postal “applications” or “applications” at local authorities and have not yet been processed. The Minister is assuming that all 94,000 “applications” result in a “declaration” but these may simply be waivers.

Of the 16,360 who have registered for a waiver, 4,403 are in receipt of mortgage supplement and 11,653 are on unfinished estates and a further 304 have waivers under both headings.

We also received from the Minister a breakdown of payments by number of homes as follows (eg 3 people have paid for 300-400 houses)

1 home – 548,228
2-10 houses – 88,255
11-20 houses – 1,265
21-30 houses – 279
41-50 houses – 62
51-100 houses – 103
101-200 houses – 29
201-300 houses – 4
300-400 houses – 3

The total number of payers above is 638,228 and presumably they account for 923,062 houses in total.

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