Mortgage Switching Plummets, Halting Approval Activity

"Mortgage Switching Activity Plummets by Over 50% in March, Leading to a Slight Dip in Overall Approvals, BPFI Reports"

Mortgage switching activity in Ireland fell by more than 50% in March 2022 compared to the same period last year, resulting in a slight drop in overall approvals, according to new figures from the Banking and Payments Federation (BPFI).

In March 2022, a total of 4,520 mortgages were approved, worth a combined value of €1.3bn. While the volume of mortgages approved dropped by 1.2% compared to March 2021, their value increased by €93m.

The most significant year-on-year change was seen in re-mortgage and switching activity, which dropped 54.4% from 867 to 395, with their value also dropping from €229m to €107m. This drop was offset by an increase in the number of first-time-buyer (FTB) approvals, up 15.7% to 2,801, and mover-purchasers approvals, up 7.7% to 1,019.

The value of FTBs now accounts for 62% of all approvals, the biggest share since the data became available in July 2014. The value of mortgage approvals for FTBs increased from €655m in March 2021 to €819m last month, while the value of mover-purchaser approvals increased to €332m from €284m.

During the first three months of this year, the BPFI data showed there were 10,908 mortgages drawn down, with a combined value of €2.87bn. This represents a 10.1% increase in volume and a 14.1% increase in value compared to the same period in 2021. However, compared to the last three months of 2021, it shows a 31.3% decrease in volume and 34.1% in value.

Brian Hayes, chief executive of the BPFI, said lending values continue to increase due to the higher cost of homes. The average mortgage is now €290,000. He added that while demand remains strong during the first three months of the year, overall the figures point to a “continued year-on-year slowdown” as mortgage switching decreases.

The decline in mortgage switching activity was likely due to the ongoing COVID-19 pandemic, which has made it difficult for people to move house or switch mortgages. Additionally, the current low-interest-rate environment may be making it less attractive for borrowers to switch lenders.

The increase in FTB approvals is likely due to the government’s Help to Buy scheme, which provides financial assistance to first-time buyers purchasing a new-build property. The scheme has been extended until the end of 2021, which may continue to support FTB activity in the coming months.

The increase in mover-purchaser approvals may be a result of the current low-interest-rate environment, which is making it more attractive for existing homeowners to move to a new property.

Overall, the BPFI figures suggest that the Irish mortgage market remains strong, with demand for housing continuing to outstrip supply. However, the slowdown in mortgage switching activity is a cause for concern, as it suggests that borrowers may be missing out on potential savings by not shopping around for the best deal.

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