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Surge in mortgage approvals looks set to fuel house price increases

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The number of people approved for a mortgage surged by a third last month, driven largely by first-time buyers.

Potential buyers are getting approved for higher amounts of borrowings, according to the figures from the Banking and Payments Federation. The figures imply property prices will keep rising.

A total of 4,124 want-to-be buyers got approval during May. In the same month last year there were 3,046 approvals, which means the total was up 34.5pc in a year.The approvals in May were valued at €884m in total. The average purchase approval in May was €228,505, up 7.7pc year-on-year.

The rise in the numbers getting the go-ahead for home loans comes as the Government has committed to reviewing the help-to-buy scheme.

Mortgage lending hits a 6 year high

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Mortgage lending has hit a 6 year high as €5.6bn was drawn down by 30,000 people.

In the last three months of 2016, more than 9,000 mortgages were drawn down. This is the highest number since 2010.

Economists are now expecting a “bumper” level of mortgage activity this year because of the easing of Central Bank lending rules and the help-to-buy scheme.

The total number of mortgages taken last year was 29,498.

New buyers and mover-purchasers accounted for 84pc of the total value of mortgages drawn down, with the rest made up mainly of investors.

The level of mortgage switching continues to increase, but it is coming off a very low base.

Interest rates here almost twice EU average.

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The average interest rate on new mortgages here remains almost twice what it is in the Eurozone. The rate stood at 3.38pc in November. Although this has fallen over the past 12 months, it is much higher than the euro area rate of 1.72pc, according to data from the Central Bank.

New variable rate mortgages, which had an average interest rate of 3.38pc, accounted for two-thirds of all new agreements in Ireland over the past year. A bill to allow the Central Bank to force rates lower continues to be examined in an Oireachtas Committee

First-time buyers rush for rebate

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More than 800 applications have been made for the new Help-to-Buy scheme for first-time buyers (FTBs).

Interest has remained high since it opened earlier this month, with some 828 FTBs filling out online application forms over the week in the expectation of securing a lucrative tax rebate.

The scheme allows for a refund of income tax and DIRT, but not USC or PRSI, paid over the previous four years which can be put forward towards a deposit to buy a new house or apartment.

Some 5pc of the purchase price to a maximum of €20,000 can be claimed. A price ceiling of €600,000 applies to homes purchased between July 19 and December 31 last. This falls to €500,000 for properties bought this year.

Good news for mortgage holders: ECB rate hike ‘years off’

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There is unlikely to be a rise in European Central Bank interest rates for the coming years, a development that will be a huge boost to thousands of mortgage holders.

Trackers are pegged to the ECB lending rate, and cannot be increased unless the ECB raises its main rate.

It could be three to four years before interest rates rise.

It is estimated that about 350,000 mortgage holders are now on tracker rates, with about 300,000 on variable rates.

All you need to know about the rule change for first-time buyers

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The Central Bank has made a dramatic change to its mortgage lending rules for first-time buyers.

However, there are also fears that the loosening of the lending limits will lead to even higher property price rises.

First-time buyers will now be able to borrow with a deposit of 10pc, if they meet other lending criteria.

Up to now, new borrowers could have been approved for a mortgage with a deposit of 10pc for borrowings up to €220,000 and a 20pc deposit for all amounts over that. The changes will take effect from 1st January 2017.

At the moment, a first-time buyer purchasing a home for €300,000 needs a deposit of €38,000.

From next year, the new buyer should qualify for mortgage approval with a deposit of €30,000.

This will give the buyer an extra €8,000.

And if the buyer qualifies for the Government’s Help-to-Buy scheme for new homes, they will get a tax rebate of €15,000.

This means they will be able to buy with an effective deposit of 95pc of the property’s value.

Help to Buy- Budget 2017

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A new scheme is being introduced to provide a rebate of income tax paid (but not USC or PRSI) over the previous 4 years for first time buyers buying a newly built principal private residence or equivalent self build, on or after 19th July 2016. The rebate will be 5% of the purchase price of the property up to €400,000, i.e. a maximum rebate of €20,000 per property (not per joint buyer) assuming the buyer(s) have paid at least €20,000 income tax over the previous four year period.

The rebate only applies where the mortgage is at least 80% of the home value.

Those who will NOT qualify for the rebate include:

• First time buyers who signed a contract to buy a new home before 19th July 2016;

• First time buyers with an LTV less than 80%;

• First time buyers buying a home valued at more than €600,000;

• Non first time buyers; and a joint purchase between a first time buyer and non first time buyer; both purchasers must be first time buyers

The rebate scheme is scheduled to run to end of 2019.

 

 

Surge in approvals for home loans – but few are likely to buy

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There has been a surge in the number of people getting approval for a mortgage, but many of these people being approved for a home loan are competing hard with each other for the few houses that are available and are unlikely to end up drawing down the mortgage, experts have said.

In August, close to 3,000 people received mortgage approval to buy a home – a rise of 37pc on the same month last year. However, the number of homes listed for sale on MyHome.ie was close to a historic low – at 23,500 in June this year. Put simply, the lack of housing construction means that greater numbers of potential buyers are focusing on a smaller pool of homes listed for sale.

Central Bank told to change lending rules

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Fianna Fail and Labour call for deposit cuts for first-time buyers struggling to get on ladder.

First-time buyers are being frozen out of the housing market due to high rents coupled with the massive mortgage down payments they are forced to save due to the Central Bank rules.

Young families hoping to trade-up are also being crippled by the lending conditions which mean they have to save a huge 20pc deposit on any home they hope to buy.

Fianna Fail is calling for the rate for first-time buyers to be slashed by a third if the house-buyer has a proven track record of paying rent for three years.

The party’s submission, which was prepared by Fianna Fail finance spokesman Michael McGrath, also calls for new laws which will force banks to take out insurance against losses arising from borrowers defaulting, or entering into a mortgage arrears resolution process.

The cost would be shared between the borrower and lender – the bank would add an interest rate to the loan to cover the insurance.

‘Flaws’ in system that denies homes flood insurance

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The Central Bank needs to carry out an investigation into how insurance companies decide homes are at risk of flooding, a new report has recommended.

A committee of TDs and senators has found evidence that insurance firms are using flood prediction maps to avoid providing cover for properties at the remotest risk.

The Oireachtas Committee on Environment found there are flaws in the geo-coding of areas for flood risk that prevent homeowners getting insurance.

Social Democrat TD Catherine Murphy said she knows of situations where houses on hills are refused cover because they are considered to be in a flood-risk area.

“Today there are people in the position that their homes were never flooded but they can’t get insurance,” she said.

“There is a big issue with the insurance company taking advantage of the flood mapping and actually avoiding even the remotest risk,” she added.

The committee’s 156-page report, entitled ‘Flooding and Property Insurance in Ireland’, comes in the wake of the devastation wreaked by Storm Desmond across the country last week.

The report says the flood insurance issue needs a “systematic investigation” by the Central Bank to determine its extent and advise on appropriate measures.Labour TD Michael McCarthy said: “It’s not logical and neither is it fair or moral that people in areas that aren’t affected by flooding can’t get insurance.

“If the evidence proves that insurance companies aren’t stepping up to the plate, then Government will have to resort to measures that will put that right.”

However, he said that the committee did not see fit to endorse a levy on all home insurance to subsidise cover for those in high-risk areas.

The committee heard from organisations representing those who have been excluded from flood cover, or who are at risk of being excluded, that their homes are no longer mortgage-able and the value of their homes plummets.

The report also recommends that the Government give consideration to a ban on future building on flood plains and in low-lying coastal areas.