The mortgage market has experienced a slowdown in recent times, with mortgage approvals declining both monthly and annually.
However, new data from the Banking and Payments Federation Ireland (BPFI) highlights that first-time buyers (FTBs) are driving strong mortgage approvals.
While overall mortgage approvals decreased by 13.7% in April 2021, FTB mortgage approvals increased by 5.3% annually, accounting for 62.3% of all mortgage approvals in that month.
The BPFI CEO, Brian Hayes, notes that the slowdown in mortgage approvals has affected almost all customer segments, with the exception of FTBs.
This trend is significant, as FTBs typically face more difficulties in securing mortgages due to a lack of credit history and lower deposit amounts.
The increase in FTB mortgage approvals could be attributed to the government’s Help-to-Buy Scheme, which assists first-time buyers with the deposit required to purchase a home, among other things.
This article aims to explore the factors contributing to the strong mortgage approvals by FTBs and the implications of this trend for the overall mortgage market.
April Mortgage Trends
Despite a decline in overall mortgage approvals in April, first-time buyers continue to drive strong mortgage activity. They accounted for the majority of approvals at 62.3% and experienced a 5.3% annual increase in approvals. This is indicative of a strong demand for homeownership among first-time buyers, despite the wider slowdown in the market.
Furthermore, the fact that €701 million of the €1,116 million in mortgages approved in April went to first-time buyers is a clear indication of their importance in the market. This is likely due to a combination of factors such as government initiatives to support first-time buyers and low interest rates.
Overall, the data suggests that first-time buyers remain a key driver of mortgage activity in the Irish housing market, even in the face of broader market challenges.
FTBs Leading the Way
The data indicates that mortgage approvals for a particular group of homebuyers have remained resilient despite the wider slowdown in the market. First-time buyers (FTBs) have continued to drive strong mortgage approvals, recording a 5.3% year-on-year increase in April.
This is in stark contrast to the overall market trend, which saw a decline of 9.4% in mortgage approvals year-on-year. In April, FTBs accounted for 62.3% of mortgage approvals, while mover purchasers made up 22.5%.
In monetary terms, €701 million out of the total €1,116 million in mortgages approved were for FTBs. This indicates that FTBs are still a significant driving force in the mortgage market, despite the overall slowdown.
Remortgaging Decline
Remortgaging and switching activity experienced a significant decrease in both volume and value terms, indicating a slowdown in this particular segment of the mortgage market. According to the latest data from the Banking & Payments Federation Ireland (BPFI), remortgaging and switching activity declined by 63.5% in volume terms and 64.6% in value terms in April.
This is a sharp contrast to the FTB mortgage approvals which increased by 5.3% annually and accounted for 62.3% of mortgage approvals in April.
The decline in remortgaging and switching activity can be attributed to a number of factors, including the current economic climate and the increased difficulty in securing a mortgage due to the stricter lending criteria imposed by banks. Moreover, with interest rates at historic lows, many customers are choosing to stay with their current provider and avail of the low rates instead of switching providers.
Despite this decline, mortgage activity remains historically high, and the FTB segment continues to be a driving force behind the strong mortgage approvals.
