July saw a resurgence in mortgage approvals, both monthly and annually, driven by first-time applicants and aided by an emerging increase in loan switching activity as certain homeowners reach the end of their fixed-rate terms. In this month, Irish lenders approved a total of 5,313 home loans, demonstrating an 11.9 per cent increase from the previous year, as per the statistics from the Banking & Payments Federation Ireland (BPFI).
This comes after a relative slowdown in mortgage approvals during the same period in the previous year due to a spike in loan switching activity following the European Central Bank’s (ECB) decision to raise rates in 2022. It’s noteworthy that approvals in July soared by 18.6 per cent from the previous month. Moreover, the total worth of the approved mortgages for July was €1.61 billion, marking an 18.8 per cent increase from the past year and a 20.2 per cent increase from June.
Diarmaid Sheridan, an analyst with Davy, believes that the impressive mortgage approval statistics for July contradict the stagnant to declining trend observed in past months. According to Mr Sheridan, individuals applying for mortgages appear to gain confidence owing to decreasing formal interest rates. Presently, the ECB has lowered its key lending rate by a quarter percentage point to 4.25 per cent in June and is anticipated for a similar reduction in the subsequent council meeting on September 12th.
Breaking down the details of July’s mortgage approval, first-time buyers made up nearly 63 per cent of the total approval value, while a further 27 per cent were homeowners moving houses, as per the data provided by the BPFI. Brian Hayes, the Chief Executive of BPFI, pointed out that the volumes and values of first-time buyer approvals have exceeded any levels seen since 2014, with a rise of 12.8 per cent and 21 per cent respectively, reaching over €1 billion for the first time within a single month.
The value of remortgage activity and switching has seen a significant increase of 27.3% monthly and 15.3% annually, starting from a relatively low base, amounting to €105 million.
According to Mr Hayes’s report, there has been sturdy mortgage activity, with 49,384 mortgage approvals in the 12 months up to July 2024. Almost 31,000 of these were taken up by first-time buyers, suggesting a promising pipeline for first mortgage drawdowns by first-time buyers. Additionally, applications for the ‘Help to Buy’ scheme under the Revenue Commissioners have surged by 45% year-on-year in the initial seven months of 2024, reaching close to 24,000.
The Government’s ‘Help to Buy’ scheme assists first-time buyers by allowing them to accumulate the deposit required under Central Bank rules to secure a loan. The scheme grants borrowers to claim refunds on income alongside deposit interest retention tax paid under the State in the four years prior to taking out a loan.
This year, approximately 33,000 new houses are set to be finalized, mirroring the previous year’s data, as stated by the Economic and Social Research Institute (ESRI). Conversely, Taoiseach Simon Harris announced on Sunday that close to 40,000 new houses would complete before the year ends. He also restated his commitment to construct a quarter of a million new houses over the coming five years.
In contrast to expectations, fewer than 12,750 houses were finalized in the first half of the year, as per the Central Statistics Office (CSO). However, construction began on nearly 33,800 houses during this period, more than twice the previous year’s number according to the Department of Housing figures.
In the first half of this year, the three remaining banks made up 91% of new written mortgages. This was a slight decrease from 93% from the whole of 2024, as nonbank lenders are gradually becoming more competitive due to a slump in market interest rates.