Slow moving second-hand home market a drag on mortgage lending – The Irish Times

A ramp-up in house building in recent years may be something of a balm for first-time buyers. But the latest mortgage approval and drawdown figures from the Banking and Payments Federation of Ireland (BPFI) shine a light on another troubled aspect of Ireland’s dysfunctional housing market and illustrate the complexities of the crisis at large.

The figures point to a sharp drop-off in both mortgage approvals and drawdowns in the early going this year. The latter phenomenon, according to industry experts, is somewhat expected given seasonal effects, with the back half of any given year considered the busiest time for sale closures and drawdowns. More worrying is the drop-off in approvals, down 16.4 per cent in March year-on-year.

A large slide in switching and remortgaging activity – which fell 21.5 per cent year-on-year – is certainly a big factor. But the home loan type with the second biggest drop-off in approvals in the year (17.5 per cent) to March was the mover mortgage, a detail that is illustrative of a bigger malfunction in the market this year: the relative paucity of second-hand homes being put up for sale.

“We’ve really seen a drop-off in the number of movers,” Martina Hennessy, managing director of online mortgage brokerage Doddl, told Cantillon. “That, I feel, is to do with the fact that it’s so difficult for people who have a home to trade up. It’s such a competitive market.”

In a nutshell mover-purchasers tend to be “up-sizers” looking to buy larger, second-hand family homes in established suburban areas, as opposed to first-time buyers who are happy to buy a new-build in commuter counties where land is cheaper. Because people aren’t selling their homes those looking to sell and scale up are unable to do so, and so on in a self-propagating loop.

In a word the second-hand market is “illiquid” as Davy Stockbrokers put it in an analyst note on Friday. It’s no surprise that Davy’s number-crunchers recently downgraded their new mortgage lending outlook for the Irish banks this year, now expecting it to decline by 3 per cent in 2024.