Economics: Strong growth continues in mortgage drawdown activity but slowdown evident in approvals

New figures from the Banking & Payments Federation Ireland (BPFI) this morning showed that 10,873 new mortgages to the value of €2,369m were drawn down by borrowers during the third quarter of 2018.

This represented an increase of 14.4% in volume and 17.5% in value on the corresponding third quarter of 2017. It also represented an increase of 16.4% in volume and 17.6% in value compared with the previous quarter.

First-time buyers (FTBs) remained the single largest segment by volume (48.3%) and by value (48.7%). Together, FTBs and mover-purchasers accounted for 81.4% of the total value of mortgages drawn down.

The volume and the value of re-mortgage loans (switching) continued to increase. There were 1,420 re-mortgage loans in the third quarter to the value of €325m. This reflected year-on-year growth of 82.8% in volume and 82.2% in value.

The number of mortgages for new properties rose by 19.9% year-on-year to 2,438 in the third quarter, while the value of those mortgages jumped by 26.4% to €588m. Second-hand property mortgage volumes grew by 4.0% to 6,289 and by 5.9% to €1,398m.

Meanwhile, a total of 3,825 mortgages were approved in September – some 1,782 (46.6% of total volume) were for first-time buyers (FTBs) while mover purchasers accounted for 1,067 (27.9%).

The number of mortgages approved rose by 4.5% year-on-year but fell by 8.6% month-on-month.

Mortgages approved in September were valued at €822m – of which FTBs accounted for €385m (46.8%) and €271m (33%) by mover purchasers. The value of mortgage approvals rose by 4.3% year-on-year and fell by 11.6% month-on-month.

Re-mortgage/switching approvals rose on a year-on-year basis – by 51.7% in volume and by 42.1% in value terms.

Economics: Ireland’s unemployment rate likely to have fallen further in October

The domestic economic focus on Wednesday now turns to the monthly unemployment figures for October, which will be released by the Central Statistics Office later this morning.

There was a seasonally-adjusted total out of work of 129,400 in September, down 4,800 from 134,200 in August. With the sharp monthly drop in the numbers out of work in September, the seasonally-adjusted unemployment rate fell to 5.4% from 5.6% in August. The August jobless rate was the lowest since February 2008 and a more than ten-and-a-half percentage point improvement from the peak of 16.0% hit in January/February 2012 during the financial crisis. Furthermore, Ireland’s jobless rate remains over two-and-a-half percentage points below the current Eurozone average of 8.1%.

While there has been a sharp drop in the headline unemployment rate, the adjusted jobless rate for persons aged 15-24 years (youth unemployment) remains elevated despite falling to 12.9% from 13.9% in August. Although the rate has dropped from 16.1% in September 2016, it is still a lot higher than desirable. Significant progress has been made on this front in recent years, but a lot more needs to be done. In our view, Government initiatives in terms of training and education should focus on this group in particular.

The average jobless rate is now projected at 5.6% in 2018, down from 6.7% in 2017. A further fall, to 5.0%, is envisaged for 2019. We are looking for an out of work total of 126,000 in October, which would see the jobless rate drop to 5.3%.

Economics: Latest Irish private-sector credit data forecast to show loans to households still subdued

Also on Wednesday, the Central Bank will publish the official private-sector credit data for September. Loans to Irish households rose at a rate of 0.7% year-on-year in August, up from 0.6% in July. Adjusted for loan sales and securitisations, there was an annual fall of 1.4%.

Mortgage loans increased in net terms by €32m in the month, the third consecutive monthly rise. In year-on-year terms, net mortgage lending rose by €677m in August or 0.9%, representing the tenth consecutive month of positive annual growth.

Meanwhile, deposits from households increased in net terms by €450m in August, reversing a net decrease seen in July. Overnight deposits predominantly drove this increase. In annual terms, household deposit lodgements were €3.5bn higher than withdrawals, growing by 3.5% over the year.

Developments in loans and deposits mean that Irish households continued to be net funders of the Irish banking system in the month. Banks held €11.6bn more household deposits than loans at end-August, with the loan to deposit ratio standing at 0.89.

The latest set of credit figures were once again a mixed bag, with some good and bad features. The very high level of deposits despite ultra-low interest rates still suggests that households remain cautious all things considered, and appear reluctant to take on more debt.

As regards September, loans to households are projected to be 0.8% higher in the year, with household deposits remaining elevated at around €102bn.

Alan McQuaid (31/10/18)
Economist