The number of new mortgages lent by Irish financial institutions dropped by 19 per cent in the first three months of this year compared to the same period in 2006. Ciarán Brennanreports.
New figures released by the Irish Banking Federation (IBF) also show that lending in the first quarter of 2007 is down 7.5 per cent in value when compared to the first three months of last year.
The fourth in the IBF's series of mortgage market profiles in conjunction with PricewaterhouseCoopers shows that 38,236 new mortgages to the value of more than €7.8 billion were issued in the first three months of 2007 - down from 47,244 mortgages with a value of about €8.44 billion in the first quarter of 2006.
While the lowest level of mortgage activity seasonally occurs in the first quarter of the year, the latest figures reflect an ongoing downward trend in the mortgage market.
In value terms, the slowdown in new mortgage lending is evident across most market segments, with the exception of remortgaging or switching, which showed year-on-year growth of 5.8 per cent.
The slowdown was also evident across all market segments in terms of volume, with the smallest decline among the first-time buyer segment, which was down 9.9 per cent.
First-time buyers now account for 20.7 per cent of the total market by volume, the highest share since the survey began.
However, average loan sizes for first-time buyers and mover-purchasers decreased in the first quarter of 2007 against the final quarter of 2006, which IBF chief executive Pat Farrell said could be a due to affordability tightening.
Mr Farrell said higher interest rates and stamp duty uncertainty were taking their toll.
"A series of interest rate increases and nine months of sustained market uncertainty around signalled changes in the stamp duty regime have contributed to the market slowdown.
"While the former is outside our direct control, the latter is not and should be resolved without further delay," he said.
In a separate report, AIB Global Treasury said the housing market was entering a crucial period and deteriorating affordability conditions were taking a toll on activity levels.
Given the price trends since the beginning of the year, it said it was revising downward its forecast for house price inflation at the end of 2007. "We are now forecasting an end-year inflation rate of -2 per cent, which would still constitute a soft landing," it said.
"However, much depends on whether there is a pick-up in sentiment in the coming months. The stamp duty issue should be resolved in the near future, now that the election is out of the way. The housing market certainly does not want a prolonged period of inactivity awaiting resolution of this issue."
Despite the fall in new mortgage lending, the overall size of the residential mortgage market continued to rise in the period and now stands at €129 billion, according to the IBF.
