mortgage Archives - Pat Carroll PCCO - Chartered Accountants & Tax Advisors

Fall in mortgage approvals but market shows resilience

The number of new mortgage approvals in May was nearly 62% lower than the same month last year.

According to the Banking and Payments Federation Ireland, the decrease was not unexpected given the scale of the lockdown and physical restrictions due to Covid-19.

In total 1,879 new mortgages were approved by lenders here in May – a decrease of 14.6% compared to a month earlier.

But compared to May of last year the volume was nearly 62% lower.

At €442 million the overall value of the mortgages approved dropped nearly 16% between April and May, and 61% compared to May of 2019.

On the face of it, the figures may look alarming and point to either a major pull back by mortgage issuers or a dramatic drop in demand.

But the Banking and Payments Federation Ireland said it was expected given the scale of the lockdown and physical restrictions, and their impact on employment figures and economic uncertainty. 

The organisation said it was also significant that despite the majority of the country being shut down and the economy experiencing an unprecedented shock, 1,900 mortgages worth €442m were approved.

It said it shows that demand within the housing market may be more resilient than expected and also demonstrates that banks are meeting that demand.

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Mortgage approvals down over 40% in April as impact of Covid-19 hits

The level of mortgage approvals fell substantially in April, according to the latest figures from the Banking and Payments Federation.

The figures are reflective of the fact that the property market has all but stalled in recent months as the Covid-related shutdown of the economy took effect.

Just 2,200 mortgages were approved in April with a total value of €525 million.

That represented a fall of just over 41% in volume terms in the month and a fall of 40% when values are considered.

When compared to the same period last year, approval volumes were down 46.5% while values were 43.6% lower.

The breakdown of approvals was largely reflective of the situation before the Covid restrictions.

About half were accounted for by first-time buyers and a further quarter were so-called “mover purchasers”.

BPFI Chief Executive Brian Hayes said the figures were not surprising in the context of the economic impact from the pandemic.

“In the current conditions, it is likely that we will see a similar fall in mortgage drawdowns for this quarter as they follow the downward trend shown in today figures,” he said.

“Looking ahead, there is no doubt that the period ahead will remain challenging for the mortgage market and the housing market as a whole as the current economic uncertainty continues.

“During this period, it will be necessary for both lenders and borrowers to take a realistic and pragmatic approach given the change in individuals’ financial and employment circumstances.

“This is ultimately in the best interest of the customer and to ensure that borrowers can afford the loans they take out,” he added.

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Challenging times ahead as mortgage market looks set to be impacted by Covid-19 crisis

New figures from Banking and Payments Federation Ireland show that a total of 8,728 new mortgages worth €1.996 billion were drawn down by borrowers during the first quarter of 2020.

BPFI said this represents an increase 1.8% in volume and 6% in value on the corresponding first quarter of 2019.  

Today’s figures show a fall of 28.8% in volume and 27.9% in value compared to the fourth quarter of 2019, but BPFI said noted that the first quarter is typically the weakest quarter in any year and the fourth quarter is the strongest.

Meanwhile, first-time buyers remained the single largest segment by volume (50.4%) and by value (50.8%). 

BPFI also published today the latest figures from its Mortgage Approvals Report for March, which showed that a total of 3,733 mortgages were approved during the month.

The number of mortgages approved rose by 6.2% month-on-month but fell by 9.9% compared with the same time last year.

BPFI said the number of mortgages approved rose by 6.2% month-on-month but fell by 9.9% compared with the same time last year.

Mortgages approved in March were valued at €879m, up by 6.5% on a monthly basis but down 4.5% year-on-year.

Brian Hayes, chief executive of BPFI, said today’s figures are broadly in line with what it would have expected to see in a pre-Covid landscape with the approvals figures in particular reflecting a tapering off in the mortgage market over the past 12 months due to the growing affordability challenge for buyers. 

“Looking ahead, there is no doubt that the period ahead is going to be challenging for the mortgage market and the housing market as a whole, given the changing conditions in the economy and its direct impact on incomes and employment,” Mr Hayes said.

Mr Hayes said he expects to see the first effects of Covid-19 on the mortgage market coming through in April’s mortgage approvals figures which will be published at the end of May. 

“The change in individuals’ financial and employment circumstances will have an impact on mortgage approvals, with banks taking a pragmatic and responsible assessment of all applications from both a borrower and lender perspective,” he stated. 

“Taking out a mortgage is a major undertaking for borrowers, and no lender wants to see a borrower under distress or difficulty, especially in these highly uncertain times,” he added.

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Banks may extend mortgage breaks to six months – BPFI

The country’s five retail banks may extend loan repayment breaks to help homeowners cope with the impact of the coronavirus to six months from the three months currently in place, the head of their representative body has said. 

The banks agreed the measure in the middle of last month and had granted or were close to completing 45,000 mortgage breaks by the end of last week, Banking and Payments Federation Ireland (BPFI) said. 

Almost 14,000 breaks and 3,200 working capital facilities have also been put in place for businesses. 

“There is an expectation, because this has happened in other European countries, that the potential of a six-month break may well apply,” BPFI’s chief executive Brian Hayes told an Irish Times podcast. 

“We’re in discussions right now with our regulator, the Irish Central Bank, and with the industry to see how that might work because if you don’t pay for six months that is a pretty large amount of money you owe across the term of your mortgage,” Mr Hayes added. 

The talks with the Central Bank centre around the regulatory treatment of those who would continue to receive breaks, Brian Hayes said. 

The three-month breaks do not impact customers’ credit record, and the banks reporting of the facilities. 

Brian Hayes added that some of the mortgage holders who had sought a break were among the almost one-in-eight borrowers whose loans have already been restructured, mostly as a result of the financial crisis a decade ago. 

“Some people won’t get through this, and that’s the reality we face. Inevitably it will lead to more non-performing loans, but we need to minimise that in terms of the regulatory treatment, if the length of time is six months,” he said. 

“Losses will emerge right the way across the sector and that’s just the inevitability of the recession we’re facing,” he stated.

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45,000 mortgage breaks granted by Irish banks

More than 45,000 mortgage payment breaks have been or are about to be given to borrowers suffering financial difficulty as a result of the Covid-19 pandemic.

According to the Banking and Payments Federation Ireland (BPFI) this represents approximately 5% of the total mortgage market here.

The initiative is being operated by all five of the main retail banks and was introduced a number of weeks ago.

There has also been strong demand for payment breaks for small firms.

“Close to 14,000 SME payment breaks were granted or in the process of being granted over the past three weeks, while banks were also well advanced in processing requests for working capital facilities, which total 3,200 to date,” said Brian Hayes, chief executive of the Banking and Payments Federation.

“Banks are experiencing a far greater demand by SMEs for payment breaks, which account for 65% of the overall demand in supports, while working capital facilities account for just 35% of the requests received from SMEs.”

Mr Hayes said the figures indicate the scale of the financial impact of Covid-19 on both individuals and businesses.

“Substantial changes across a whole range of the banks’ operational systems have been necessary in order to process the thousands of payment break applications which have been received, and which banks will continue to receive as customers seek support as a result of the Covid-19 pandemic,” he said.

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First time buyers continue to drive mortgage market

First time buyer activity continued to drive the mortgage market in the final three months of last year, new figures from the Banking & Payments Federation Ireland show.

A total of 12,259 mortgages to the value of almost €2.77 billion were drawn down in the three months from October to December.

This represented an increase of 1.2% in volume and 5% in value on the same time in 2018.  

First-time buyers remained the single largest segment by volume (52%) and by value (53%),  the figures show.

The BPFI said that total drawdown activity for last year came to €9.5 billion – the highest drawdown value in over a decade.

Meanwhile, a total of 2,964 mortgages were approved in December, with first time buyers making up 51.7% of the total volume. Mover purchasers accounted for 25.7%.

The number of mortgages approved rose by 1.9% year-on-year but fell by 29.1% compared with the previous month.  

The BPFI said this reflects the seasonal trends generally seen at that time of the year,  noting that in the past four years, approval volumes have dropped by 28-30% between November and December. 

Mortgages approved in December were valued at €696m. First time buyers accounted for 52% of these mortgages while mover purchasers made up 29.4%.

The value of mortgage approvals rose by 6.1% year-on-year but fell by 27.5% month-on-month – again due to seasonal factors, the BPFI said.

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Mortgage holders benefit from – and need – advice, says ESRI

The Economic and Social Research Institute has found that mortgage holders can get a better deal when they read independent advice. 

However, the think tank also found some serious misunderstandings about how mortgages work. 

The ESRI and the Competition and Consumer Protection Commission brought together a sample of 110 people with mortgages and gave them a series of questions.  

They were asked to evaluate mortgage switching offers. They were then stopped halfway through and asked to read the advice on mortgages posted on the CCPC website.  

The experiment found that before reading the advice, some had opted for cashback offers in preference to offers with lower Annual Percentage Rates or APR’s. 

This would have meant higher repayments over time. 

Reading the advice, however, did make some choose the cheaper option of a lower APR. 

The exercise also found that only a third knew that switching mortgages involves paying for a solicitor, while only a quarter knew about the need to pay for a property valuation. 

Three quarters also misunderstood what an interest only mortgage was and one in ten misunderstood their debt liability were they to fall into arrears. 

“There are large gains to be had for many families by switching mortgages, so it is encouraging to see that reading official advice improves consumers’ decision-making and their confidence,”  Dr Shane Timmons, of the ESRI’s Behavioural Research Unit said. 

“Cashback can be useful, but in our experiment consumers placed too much weight on it until they read the advice. Generally, most people are better off securing long-term savings from a lower APR,” he added.

Fergal O’Leary, a member of the Competition and Consumer Protection Commission, said that for most consumers, taking out a mortgage is the largest financial commitment they will make. 

“It is crucial therefore that they fully understand the terms and conditions as well as the full long-term cost of the mortgage they choose,” he said. 

Mr O’Leary said the CCPC commissioned the research to better understand how consumers make decisions in the context of the different special offers and rates available in the mortgage market.

He said the research clearly shows that it is worthwhile to take some time to review the independent information, including the mortgage comparison tool, at 

“This is the case for first time buyers but equally so for many consumers who could save on their mortgage by switching. Taking a few minutes to check can help consumers cut through the advertising material and allow them to get the best deal for their needs,” he added.

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Mortgage approvals up in November; BPFI

Nearly 4,200 mortgages were approved in the month of November, according to figures from the Banking and Payments Federation.

It was down around 7.5% on the approval numbers in October, but up 2% on November of 2018.

In value terms, it amounted to €960 million in November.

That measure was also down month-on-month, but up on the year.

There tends to be a slowdown in the mortgage market as the year comes to an end, but the figures point to continued buoyancy.

First time buyers once again accounted for the bulk of the activity. 

Just over half of the mortgages were issued to this cohort with movers accounting for just over a quarter of the approvals.

There was a fall off in activity among those remortgaging or switching mortgage providers. Approvals in this cohort were down over 11.5% on November of last year and 3% on October.

“While mortgage approvals for November were down on the previous month, this was expected due to the seasonal effect that we typically see in the latter stages of the year,” Brian Hayes, CEO of the Banking and Payments Federation said. 

“Looking at the recent underlying trends, approvals grew both in volume and value terms year-on-year with the First-time buyer segment showing consistent growth and this continues to be a key driver of the market.”

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First-time buyers drive demand for mortgage approvals

New figures from Banking & Payments Federation Ireland show strong growth in mortgage approvals figures for October, driven by demand from first-time buyers.

The BPFI figures show that a total of 4,514 mortgages were approved in October . Of these 51.6% were for first-time buyers while mover purchasers accounted for 27%.

BPFI also said that the number of mortgages approved in October rose by 18% month-on-month and by 5.9% year-on-year.

Mortgages approved in October were valued at €1.020 billion. First time buyers accounted for €547m of this, while  €308m were accounted for by mover purchasers.

The value of mortgage approvals rose by 22.5% on a monthly basis and by 9.7% on an annual basis. 

Meanwhile, re-mortgage and or switching approvals rose by 17.1% in volume on the previous month and fell by 1.5% year on year.

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New rules agreed for distressed mortgage holders

An agreement on how to resolve disputes between lenders and distressed mortgage holders has been reached between two leading agencies.

MABS, the State-backed Money Advice and Budgeting Service and the Banking and Payments Federation have announced the agreement, saying it will help consumers who are struggling with mortgage debt.

The agreement extends to so-called vulture funds, which have been the subject of much controversy for how they handle home repossessions.

They are openly referred to as vulture funds, but in banking circles they are officially called Credit Servicing Firms, and are now subject to regulatory oversight by the Central Bank.

The funds buy distressed mortgages off the banks, at a knockdown price, in the hope of selling on at a profit.

That can often lead to people being evicted, and the vulture funds have been roundly criticised for being heavy handed and unsympathetic to struggling families.

The agreement applies to borrowers who have already been through the Central Bank Mortgage Arrears Resolution process without success and are entering the legal process.

It sets out rules of engagement between funds and MABS, when they are representing mortgage holders.

Given the unease over relations between both sides in recent years, it is a first step in trying to resolve difficult issues, by providing some fairness for borrowers.

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