Number of mortgage approvals fall by almost 10% as interest rate pain bears down on housing market
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The number of mortgage approvals has fallen for the third consecutive month as the European Central Bank's (ECB) interest rate campaign continues to dampen the broader market, new banking industry figures suggest.
Falling by almost 10% annually, interest rate hikes continue to bear down on the housing market, with a total of 4,747 mortgages marking a three-month low in approval rates.
Despite the slump across the wider industry, figures from July's Mortgage Approval report by the Banking and Payments Federation Ireland (BPFI) show strong first-time buyer activity, accounting for more than 61% of total mortgage approvals.
"Volumes and values rose by 22.8% and 26.7%, respectively, year-on-year in July 2023, the fifth successive month in which FTB mortgage approvals have risen in year-on-year terms," said BPFI Chief Economist, Ali Ugur.
However, the growth in first-time buyers should not be a shock, says Ian Lawlor, managing director of Lotus Investment Group, noting latent demand in the sector and the volume of new homes becoming available.
"The 2022 Census figures show that Ireland’s population is growing at a higher rate than its housing stock is so it’s not surprising that those that can afford to borrow and buy are doing so," Mr Lawlor continued.
Despite rising pricing pressures for prospective homebuyers, Trevor Grant, chairperson, Association of Irish Mortgage Advisors says it is still cheaper to buy than it is to keep renting.
"People don’t want to rent for some many reasons; they are too exposed to being forced to move if the landlord decides to sell and can’t really settle if they can’t put a picture on the wall," Mr Grant continued. "In addition, income and employment prospects are both strong, so banks are willing to lend. It’s all positive at the moment for first time buyers."
Along with new buyers, mover-purchasers saw a 6.8% rise in mortgage approvals, with residential investment letting also rising annually by more than 11%.
Meanwhile, annual switching/re-mortgaging activity dropped notably by more than 78% to 332, up marginally on the previous month, with top-up approval values rising by 48.5% annually to €33m.
As uncertainty looms over the ECB's September meeting, nine consecutive rate hikes have also led to the highest annual value of mover purchase approvals seen since the series began, reaching almost €3.9bn in the twelve months to July 2023.
In addition, the average mover purchase approval exceeded €340,000 for the first time last month, according to Mr Ugur, reaching €340,957 in July 2023.
Among purchase mortgage approvals, yearly volumes grew by just under 18%, with the value of activity growing by 22% in the same period. In total, there were 136 purchase mortgage approvals, valued at €1.24bn in July2023. On an annual basis, 55,246 mortgage approvals were reported, valued in total at €15.4bn.