The Banking and Payments Federation Ireland (BPFI) highlights the robust level of mortgage activity still going on in the Irish market in its latest monthly snapshot of approvals. The lobby group’s latest figures show there were 50,740 mortgage approvals in the 12 months to the end of November, valued at €14.4 billion. This was down 2 per cent on the previous 12-month period.
In the face of 10 consecutive interest rate hikes from the European Central Bank between 2022 and 2023, which has upturned the previous era of zero-interest rates, this is a strong level of activity. The bulk of transactions are first-time buyers availing of the Government’s two help-to-buy schemes. They accounted for 61 per cent or over 30,000 of the mortgage approvals secured during the 12-month period (€8.8 billion in value terms).
This is something of a mixed blessing. While more people are getting on the property ladder as a result of the Government schemes, which offer tax rebates and other financial incentives to help with affordability, the schemes are inflationary and ultimately make property more expensive for everybody.
Proof of this can be seen in the Central Statistics Office’s latest Residential Property Price Index, which indicates that while headline house price inflation nationally has softened to just 2 per cent in the face of these higher borrowing costs, price growth in the new homes market remains over 10 per cent.
This level of inflation, driven also by the relaxation of the Central Bank of Ireland’s mortgage rules, is entirely at odds with the rest of the market (the cost of existing dwellings fell by 1 per cent over the same period).
Developers will claim the price increases reflect the rising cost of construction, but this level of price growth far outstrips the current uptick in wages or material costs, suggesting the various State interventions are fanning inflation in a market characterised by a lack of affordability.