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.”
NAMA Wine Lake 
“Absolutely dreadful results”
Absolutely great results. The last thing we need is more people taking on more debt. We are already #1 in Europe for home ownership at 83%, Germany is number #14 at 43%.
http://www.nationmaster.com/graph/peo_hom_own-people-home-ownership
Reasons why home ownership is a bad idea for our citizens and our economy.
1. Poor investment: historically just about beats inflation rate.
2. Tendency for bubbles:need I say more.
3. Not an export industry:we are selling houses to ourselves.
4. Removes the focus from developing our own export industry.
5. Leads to increased costs driving up wages.
6. Reduces labour flexibility by making it more expensive to move.
7. Poor use of resources, older couples whose children have left in 3/4 bedroom houses rather than apartments.
8. Develops powerful vested elite who drive political decision making.
9. Traditionally a corrupting process. Adding value to land without work.
10. Benefits a few while loading society with the costs: roads, schools, hospitals etc.
So lets get our home ownership down to German levels and make us more competitive.
The housing ponzi scheme needs to stop.
Fairly juvenile comments – the amount of ignorant pseudo-economics in this is shocking. Something tells me you’re not an economist… though God knows they’re dumb enough already.
First, debt is not, in itself, a bad thing – (possibly) every business, businessman, entrepeneur or manufacturer who started up their own concern did so with debt. Furthermore, private debt is a symptom of low wages – people will borrow if they need something their real wages cannot acquire.
Secondly, the poll you showed was worldwide, not European.
The third sentence is a perfect of example of the people we have seen on every comment section of every website that mentions the crisis in Ireland; self-hating Paddies. The comparison is usually with the Germans, who seem to be benefitting quite well out of the crisis and the imposition of high interest rates upon countries with a fraction of their population and productive capacity. Implicitly, we have failed to live up to German expectations; and, according to the Self-Hating Paddies (SHP’s), we deserved it – ‘he hit me because he loves me’
Point 1. – this makes no sense; I’m not even sure from what angle I should criticize.
Point 2. – Em, home ownership does not create ‘bubbles’. Unique circumstances have to be present; in the Irish case, the government ran budget surpluses, thereby taking money out of the economy and placing the onus upon banks to supply credit in the place of government expenditure (Interestingly, during the same period as the profligate Paddies were actually saving, Germany ran budget deficits). The international environment was favourable for the easy (but not cheap) credit. Connections between property developers, bankers and politicians ended up in a subordination of national interest for an expansive property boom that would service the interests of all three.
And anyway, it’s a natural human desire – and the basis of any decent society that people have a property investment in that society (or at least can aspire toward it). People owning homes does NOT encourage bubbles – a tedious amount of historical examples can be used, not least that the highest period of renting in the West (1850-1950) was the most recession and depression prone period in human history.
Point 3. – So what? If I buy Irish milk am I cheating the country by preventing its export? There’s more to an economy than exports – in fact, they’re the most turbulent section of any economy and the first to suffer in a downturn. Again, the German obsession of the SHF’s is apparent here.
Point 4. – No it doesn’t. Is this a focus? Last time I looked, the IDA didn’t have any responsibility in this area. Is there some organization I haven’t been told about that persuades Irish people to leave their jobs in the export sector, to abandon plans to set up manufactures or hoard Irish goods and then divert them into construction? Of course not – because this point is stupid.
Point 5. – What costs do you refer to? There’s a thing called wages in economic parlance, but it’s quite distinct from ‘costs’. Is this what you refer to?
Point 6. – Well, you’re right there. People living fixed abodes with their families should be thrown out and forced to wander around looking for casual work. The cost in human misery would be immense, but at least we’ll have labour flexibility.
Point 7. – That’s right, chuck ’em out. Two people who’ve worked all their lives, living in a three bedroom house? Preposterous!
Instead, they should be forcefully relocated and manufacturing facilities should be installed in their former homes to provide a good use of resources making consumer products. For the export market, of course.
Point 8. – The property didn’t create the elite, the elite created the property boom – FF and FG have been in the back pocket of property developers since the 1970’s. You got it the wrong way ’round.
Point 9. – ‘Traditionally’ – examples are noticeably lacking. The second sentence is more interesting. ”Adding value to land without work” – pretty sure that construction involves some sort of exertion. I’m not a builder, so I’m something of a novice in this regard, but I presumed that one would have to purchase materials (investment adding value to land) and then gather some men and equipment in the place where the building is happening and then commence work (labour adding value to land). I think that’s how it works, but I’m not certain – this is a weak point on my part, but be gentle if you criticize, as it’s not my area of expertise.
[…] of new residential mortgages in Ireland might shrink to zero-plus-noise. Arguably this has now happened. I claim no great insight and concede that it might have been dumb luck. My quasi-prediction was […]
These are pretty low numbers. Even if they double in Q2 it’s still very short of what will be needed to clear existing stock and start processing homes in foreclosure.
The results of the Allsop’s auctions suggest that if priced correctly properties will shift. It seems to me that the price is the general market remains too high.
It should also be noted that Irish mortgage rates are still way way below what the banks an access funds for. AIB issued a UK (&NI) RMBS this week. These non-(rep of)irish mortgages had 5.5yrs avg seasoning, average indexed LTV of 61% and were all performing (i.e. no mortgages in arrears were included in the pool). Only AAA-rated notes were placed. Credit enhancement to AAA WAS 30.8%. These were placed at LIBOR+250bps (with a 5yr step up to 350bps if the notes aren’t called).
Given Ireland is viewed as more toxic and the 250bps is on the cheapest AAA element, what should Irish banks margins on mortgages be?
Links on AIB’s tenterden rmbs
http://www.aib.ie/servlet/ContentServer?pagename=PressOffice/AIB_Press_Releas/aib_po_d_press_releases-0_08&cid=1336126571575&poSection=AR&poSubSection=paDA&position=notfirst&rank=top&year=2012&month=5
and the offering circular:
http://www.ise.ie/app/DeptSecurityDocuments.aspx?progID=-1&uID=4002&FIELDSORT=docId
I am in shock, hence slightly off topic. Unbelievable….
This quote appears several on the web places today from Mr. Noonan
“In all other countries people are concerned about growing inequality. In Ireland we need to keep focus on more important issues of corporate profitability and tax protection we offer international organisations. This is not the time for drastic moves to the left simply to suit populist demands for simplistic idealism of “social justice”
Fair play to you Noonan….for once I am totally lost for words….. ( I really wish I could swear and say bad things here, but better not, I will just ask instead, Mr. Noonan have you no shame?)
At the peak, the mortgage debt was around 40 billion a year. Now, if the trend continues, it will be under 2 billion. This goes from 40,000 for every person in Ireland to 2,000. These are rough numbers, but I think you can get the picture. To say this is catastrophic would be an understatement. And, nothing to really show for it other than making a very few people, (forgive me, Mr. Noonan) very wealthy and leaving all the rest to pay the bill. The IMF could not have done a better job of stripping the skin off the backs of the people to add more wealth to the oligarchy. This makes the Middle Ages look downright utopian.
People buying now don’t need mortgages. There are houses going for less than twice the average industrial wage. What would a retired civil servant, recently in receipt of a six figure lump sum, need with a mortgage if they wanted to buy a house.
Believe it or not this level of lending will mark a high water point in retrospect over the coming months and years as bank capital will inevitably be redirected towards the default cliff – raising mortages will essentially cease – that should finally clean out the banks as domestic demand takes another step down and unemployment soars – even at a reduced level of €2bn, this must be one of the few remaining investment avenues for domestic growth – though I believe the reduced cost of housing will improve standards of living with static or falling wages. I must say I do feel smug in my prudence!
Just confirming what everyone knows, but I’m sure the banks will trot out the lie that it is due to lack of demand rather than an unwillingness to lend. Bring on Pat Farrell – the Irish banks own Comical Ali.
@WSTT, these figures today are absolutely dire. Pat Farrell has nothing on these Comical Alis
“But several factors are now at play which at least offer a glimmer of hope that the housing market freefall will end later this year.
Over the entire mortgage market last year, just €2.5bn was loaned out. Experts now expect that to double to at least €5bn this year.
First-time buyers are also being encouraged to buy now by the Government, with a 25pc rate of mortgage interest relief offered — but only until the end of 2012.
And six banks are moving to offer new types of mortgages offering help to those who bought during the boom but were caught in the negative equity trap.
These homeowners, who owe more on their mortgage than their house is worth, will be able to carry some of their debt with them. This will free them up to move to another house, and could provide some much-needed activity in the sector.
Taoiseach Enda Kenny focused on efforts to reboot the housing market as he gave his speech to the Fine Gael Ard Fheis at the weekend.
“We will work with the Financial Regulator to encourage banks to offer negative equity mortgages; we will finalise and enact a Personal Insolvency Bill designed to re-balance the rights of the borrower and lender in a fairer way,” he said.”
http://www.independent.ie/business/personal-finance/property-mortgages/property-market-boost-as-asking-prices-start-to-rise-3067988.html
Graphic!
http://www.japlandic.com/2012/05/ibfpwc-mortgage-market-profile-q1-2012.html
For those who like it graphic!
http://www.japlandic.com/2012/05/ibfpwc-mortgage-market-profile-q1-2012.html
Technically the decay since 2005 has been so great that a logarithmic scale should really be used to graph these figures. I suspect that this is what the banks will eventually end up doing.
Is there any source that shows the ratio of mortgages given to mortgages requested? If there are less requests for mortgages then there will be less mortgages. Banks can’t lend to people who haven’t applied to borrow money.
That document *only* says how much BOI has lent, not how much it could have lent if it approved all applications. Nor does it say much about the financial situation of borrowers.