As inflation bites across the board, the number of people switching their mortgage is at the highest level on record, figures reveal.
Mortgages borrowing is at its highest level since the height of the boom 15 years ago.
But it comes amid a backdrop of thousands of hopeful homebuyers being squeezed out of the market by a dearth of properties for sale.
Millions of euro in lockdown savings are also adding fuel to property bidding wars.
A report on Tuesday from the Banking and Payments Federation of Ireland shows many have used lockdown to find better deals.
Switching activity grew strongly in September, with volumes up by 36.6% year on year and almost 7,000 switcher mortgages approved in the 12 months ending September 2021 – the highest annualised level on record.
But the booming figures don’t necessarily spell good news for prospective house buyers.
Housing campaigner David Hall, of the Irish Mortgage Holders Organisation, warned: ‘This is a very difficult environment for those seeking a home. It shows a continued strong performance; however, less than half those approved seem to draw down, indicating a severe lack of supply.’
He also called for more action to tackle property investors snapping up homes ahead of would-be first-time buyers.
‘It is essential some legal mechanism is found to exclude vultures from buying starter-homes,’ Mr Hall added.
A total of 11,479 new mortgages to the value of €2,784million were drawn down by borrowers during the third quarter of 2021.
This represents an increase of 40.9% in volume and 42.3% in value on the corresponding third quarter of 2020, when the country was in the middle of a lockdown.
First-time buyers remained the single largest segment by volume (52.7%) and by value (52.8%).
And their report also showed that total of 4,769 mortgages were approved in September 2021 – some 2,639 were for first-time buyers (55.3% of total volume) while mover purchasers accounted for 1,167 (24.5%).
Mortgages approved in September 2021 were valued at €1,205million – of which first-time buyers accounted for €668million (55.4%) and €336million by mover purchasers (27.9%).
BPFI chief Brian Hayes said: Almost 54,400 mortgages were approved in the 12 months ending September 2021, valued at almost €13.5billion, suggesting a strong pipeline for future demand as we move into the last quarter.’
Trevor Grant, chairperson of the Association of Irish Mortgage Advisors, said: ‘Ireland’s mortgage market is the busiest it has been in years. There’s no doubt that supply issues are making it difficult for prospective homebuyers, but healthy and intensifying competition between lenders mean first-time buyers and existing mortgage holders are in a strong position when it comes to securing good rates and terms.
‘While the volume of mortgage applications would traditionally slow down towards the end of the year, the feedback we’re getting from mortgage brokers across the country is that they do not expect the pace to slow to the extent that it usually would in December.”
Joey Sheahan, Head of Credit, MyMortgages.ie and author of The Mortgage Coach, said: ‘Switching – or at the very least reviewing your mortgage – is something I cannot recommend strongly enough. Every single mortgage holder in the country (bar perhaps those on a tracker mortgage) should undergo a mortgage review every three years or so.
‘I think what precludes a lot of people is either a) they believe the process is complex and convoluted and/or b) they are on a fixed rate and so believe they can’t move. While the process itself does involve some form filling and document gathering, it’s nowhere near as daunting a task as taking out your first mortgage, and if you take the advice of a broker, they’ll do just about all of the leg work.
‘Also, those on fixed rates are not “stuck” with a lender until the end of their fixed term. In many cases, the breakage fee to exit a fixed rate early can be zero, depending on which lender you’re with, and how far away you are from the end of the fixed rate etcetera.
‘The savings could be huge – for example, a borrower could save €56,000 in interest over the life of their mortgage by reducing their rate from 2.95% to 1.95%. Based on €300,000 loan at 60% loan to value over 30 years.’
As the economy opens up and discretionary spending increases, Martina Hennessy, managing director of doddl.ie cautioned first-time mortgage applicants to manage their spending and continue to save regularly, even if they have already saved their full deposit.
‘Even if your income is strong and you’ve saved your deposit, your application will not be successful if you are not clearly demonstrating repayment capacity prior to application.
‘As a general rule of thumb, you should show evidence of €500 per month for every €100,000 you wish to borrow to show repayment capacity.’