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Mortgage surge means house prices ‘now set to rise by 10pc’

A rush to get approved for a mortgage, with first-time buyers to the fore, is expected to push house prices up by 10pc this year.

Changes to Central Bank lending rules and the introduction of the Government’s help-to-buy scheme at the start of the year have resulted in a surge in people applying to take out a home loan.

The number of homebuyers seeking mortgage approval rocketed by 42pc in the three months to February.

Just over 2,800 people got the go-ahead from their bank to borrow to buy a home in the three months that ended in February, according to figures from the Banking and Payments Federation.

This was up from almost 2,000 in the same month a year earlier, a rise of 42pc.

The value of mortgages approved per month in the three months ending in February was €585m.

Half of this was accounted for by first-time buyers and a third by mover-purchasers.

The value of mortgage approvals rose by 54.4pc in the year.In February, the number of first-time buyer mortgages approved grew by 61pc.

Changes to Central Bank lending limits for first-time buyers took effect from the start of the year, and the help-to-buy tax rebate was formally launched at the same time. Analyst with specialist bank Investec Philip O’Sullivan said: “It appears that recent measures introduced to make the mortgage market more accessible for first-time buyers are having a marked impact.”

The average loan approved for all borrowers rose to a fresh high of €208,200, up 11pc on the year.

For first-time buyers, the average loan approved was €206,500 in February, up from the €179,300 recorded last year.

There have been 31,590 mortgage approvals in the past 12 months, with first-time buyers accounting for 17,965 of these. This represents 56pc of the approvals.

About 3,000 first-time buyers are understood to have applied so far for the help-to-buy scheme, which offers a 5pc tax rebate on the purchase of a new home for eligible applicants, up to a maximum of €20,000.

Economists have questioned the need for the scheme.

Mr O’Sullivan forecasts total mortgage lending of €7bn this year.

If that proves to be the outcome, it will be a 24pc increase on the figure for last year.

He said the strength of approvals in the first two months of the year “does suggest that the risk to this number lies to the upside, even though mortgage approvals do not flow perfectly through to actual drawdowns”.


Economist with Davy Stockbrokers Conall Mac Coille said first-time buyers were now borrowing more.

“Given the strong momentum early in the year, there is a significant possibility that Irish house price inflation could exceed 10pc in 2017,” he said in a note to investors.

The pick-up in the housing market is also evident in transaction volumes.The Residential Property Price Register suggests transaction volumes through January and February were up 7.8pc on the same period of 2016, according to Mr Mac Coille.

Goodbody economist Dermot O’Leary questioned whether or not housing supply would be able to match the strong growth in the numbers getting approved to take out a mortgage.

“Clearly, a significant deficit in housing will continue to exist, thus pushing prices up further,” he said.
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