Client News > Release
09-06-2010
Mortgage Market Reaching Bottom? - KBC Bank Ireland
Activity in the Irish mortgage market remains slow, but there are indications that some market segments may be close to a turning point, according to a survey of mortgage brokers in Ireland carried out by KBC Bank Ireland.
Speaking on the release of the survey, Mr. John Delaney, Director, Homeloans, KBC Bank Ireland said: “It is fairly clear that activity remains soft but there are some hints that particular market segments and areas are stabilising. The likelihood is that conditions will vary across segments to a greater degree as the year progresses. That said, there is little prospect of a marked upturn in house prices or mortgage activity until there is a clear improvement in confidence towards the Irish economy and job prospects in particular”.
The survey suggests new mortgage levels have remained soft of late. Approximately twice as many brokers reported reduced business volumes during the spring as indicated trading conditions had increased. However, this represents a notable improvement on the 3:1 ratio that was reported in the Winter 2009 survey.
The Spring/Summer 2010 survey indicated that ‘needs-based’ purchasers were dominating mortgage trends in recent months. More than 90 per cent of respondents said first time buyers (FTBs) had been the strongest market segment over the last three months, while no fewer than 96 per cent of brokers believe FTB’s will be the strongest segment of the market over the coming quarter.
In terms of house price declines, a majority of brokers - around 62 per cent - reported that price declines had become smaller over the last three months, while just four per cent said that price declines had become greater. The remaining 34 per cent said they believed prices had ‘stabilised’. The survey showed that, overall, house prices are estimated to have dropped by about 40 per cent from their late 2006 peak.
Austin Hughes, Chief Economist at KBC Bank Ireland, noted that any turnaround in the market is unlikely to occur rapidly. “The two key concerns cited in the survey, nervousness about job security and constraints on the supply of credit will only ease gradually. However, the fact that the drop in Irish house prices has been so large and so widespread means that some properties are beginning to look attractive to potential purchasers who have been contemplating buying for some time. In areas where supply is limited, the survey suggests activity levels could begin to improve modestly. However, it is very clear that mortgage brokers don’t see any prospect of a surge in prices anytime soon”.
The results of the Spring/Summer 2010 KBC Bank Ireland Mortgage Sentiment survey showed that 63 per cent of mortgage brokers expect business volumes to increase over the coming six months, while just six per cent anticipate a fall during this time.
Brokers were also asked about the main constraints on the mortgage market at present. Two key concerns emerged. The first, fear of job loss, is regarded as the main constraint, as potential homeowners weigh up a long term financial commitment against continuing uncertainty about employment and income prospects. The second, problems accessing credit, was also identified as a key constraint.
The survey also provided an indication of how mortgage brokers believe the National Asset Management (NAMA) will impact on the mortgage market in Ireland. About two thirds of brokers believe that NAMA will have little impact on the market within the current year, but, of the remainder, virtually all see NAMA contributing to a modest improvement in the mortgage market before the end of 2010.
About KBC Bank Ireland KBC Bank Ireland plc is a wholly owned subsidiary of KBC Group NV, an integrated financial services group active in the fields of banking, insurance and wealth management. KBC Bank Ireland has a strong presence in Ireland where it has been operating for over 30 years providing lending and investment services to business and personal customers. Headquartered in Dublin, KBC Bank Ireland has offices in Belfast, Cork, Galway and Limerick. Further information is available at: www.kbc.ie .
About the KBC Mortgage Market Sentiment Survey These results are based on a survey of Irish mortgage brokers. As brokers are responsible for a major share of transactions in the mortgage market, the survey should act as a barometer of conditions across the market as a whole. The intention of the survey is to provide timely information on current developments in the mortgage market and the major factors influencing these developments. 172 responses were received from Irish Mortgage Brokers. The survey was carried out in April 2010.
