Ireland: Mortgage Drawdowns Decline Amid Shortage of Second-Hand Homes

In Ireland, mortgage drawdowns decline due to a shortage of second-hand homes for sale. BPFI attributes drop-off in approvals to decreased mortgage switching activity.

A shortage of second-hand homes available for purchase has been identified as a contributing factor to a significant decrease in the number of mortgages approved and drawn down in the first quarter of this year, according to mortgage brokers. The latest figures from Banking and Payments Federation Ireland (BPFI) indicate a slowdown in home borrowing, with 8,419 new mortgages totaling almost €2.4 million drawn down by borrowers between January and March. This represents a 19.8% decrease in volume and a 17.7% decrease in value compared to the same period last year.

The decline in drawdowns can be attributed to various factors, including the ongoing decrease in mortgage switching activity since 2022, when borrowers rushed to secure fixed interest rate loans ahead of rising central bank interest rates. Switching and remortgaging activity volumes dropped by 21.5% year on year in March, with a 26% decrease in value terms, as reported by the BPFI.

Mortgage brokers also highlighted the impact of the limited supply of properties on drawdown activity and mortgage applications. Despite strong demand for mortgages, the lack of available properties for purchase has hindered the process. Seasonal factors may also play a role in the decline in drawdowns, as brokers typically see a surge in approvals and applications in the first half of the year, with higher drawdown activity expected in the second half.

Although there has been an overall decrease in mortgage activity, mortgage demandremains robust. The Help to Buy scheme saw a significant increase in applications, with 15,297 applications made to the Revenue Commissioners in the first quarter of 2024, a 60% rise from the previous year.

The shortage of second-hand homes and the decline in mortgage switching activity have contributed to the decrease in mortgages approved and drawn down in the first quarter of this year. Despite these challenges, mortgage demand remains strong, with the Help to Buy scheme experiencing a surge in applications.