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Mortgages - Ireland - March 2013

Although the Irish mortgage market has been hit hard by the events of recent years, there are signs that the market is beginning to show some more positive signs of activity – though nothing like the level reached during the economic boom years. This is due primarily to the growing sense that property prices have finally bottomed out. Nonetheless, lending criteria remain considerably tighter than in the pre-crisis years, while the tolerance for risk is low (and will almost certainly remain so for many years to come, at least). As a result, lending remains subdued and significant downside risks (such as high levels of unemployment and continued job losses) remain.
This report examines the mortgage market in NI and RoI. It assesses the macro and micro factors affecting the market, and also examines the key players in the market. Drawing on exclusive consumer data, it examines in detail the distribution models within the market, focusing specifically on how consumers arrange mortgages.

Some questions answered in this report include:

  • Are there credible, appealing alternatives to taking out a mortgage?
  • What type of mortgage is most popular?
  • How are mortgages generally arranged?
  • Have levels of mortgage ownership been affected by the downturn?
  • What are Irish consumers’ general attitudes towards personal finance?

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Table of contents

  1. Introduction

      • Key themes in the report
        • Data sources
          • Definitions
            • Abbreviations
            • Executive Summary

                • The market
                  • The All-Ireland mortgage market worth around €111 billion (£90 billion)
                    • Forecast
                      • Figure 1: Index value of outstanding mortgage debt, RoI and NI, 2008-18
                    • Market factors
                      • Property price stabilisation will instil confidence in consumers
                        • Unemployment represents major challenge to mortgage providers
                          • Consumer confidence remains low, despite recent gains
                            • Interest rates on mortgages not where they should be (theoretically)
                              • Mortgage arrears and defaults a major problem across Ireland
                                • Companies, brands and innovations
                                  • The consumer
                                    • Variable rate mortgages most popular, while most repaying capital plus interest
                                      • Preference for going direct when arranging mortgage
                                        • Around a third of all consumers currently have mortgages
                                          • Irish consumers are debt-averse, financially-aware and sceptical
                                          • Issues in the Market

                                            • Are there credible, appealing alternatives to taking out a mortgage?
                                              • What type of mortgage is most popular?
                                                • How are mortgages generally arranged?
                                                  • Have levels of mortgage ownership been affected by the downturn?
                                                    • What are Irish consumers’ general attitudes towards personal finance?
                                                    • Trend Application

                                                      • The Nouveau Poor
                                                        • Why Buy
                                                          • Mintel Futures: Generation Next
                                                          • Market Overview

                                                            • Key points
                                                              • Property prices stabilising – but far from highs of 2007
                                                                • NI prices up in 2012, but still down almost 60% on peak
                                                                  • Figure 2: Residential property prices, all regions and all property types, NI, 2002-12*
                                                                • RoI housing market (maybe) stabilising... but uncertainties remain
                                                                  • Figure 3: Residential property prices, all regions and all types, RoI, 2005-12
                                                                  • Figure 4: Residential property prices, all regions and all types, RoI, Jan-Dec 2012
                                                                • Unemployment represents major challenge to mortgage providers
                                                                  • RoI unemployment rate more than doubled since 2008
                                                                    • Figure 5: Unemployment rate, seasonally adjusted, RoI, 2008-12
                                                                  • Unemployment lower in NI – but increase in long-term unemployed
                                                                    • Figure 6: Unemployment rate, seasonally adjusted, NI, 2009-12
                                                                    • Figure 7: Unemployment by age, NI, Q4 2012
                                                                  • Irish consumers lacking confidence, despite recent improvements
                                                                    • NI consumer confidence improved during 2012
                                                                      • Figure 8: Consumer confidence index, NI, Dec 2009 to Dec 2012
                                                                    • RoI consumer confidence still far lower than during boom years
                                                                      • Figure 9: Consumer Sentiment Index, RoI, 2004-13*
                                                                    • Interest rates down, but mortgages stubbornly high
                                                                        • Figure 10: Selected variable mortgage rates, 80% LTV, mainstream lenders, RoI and NI, February 2013
                                                                      • Mortgage arrears in RoI now at ‘extraordinary’ level
                                                                        • Repossessions in NI now at ‘critical point’
                                                                          • Trend towards more and smaller households in NI and RoI
                                                                            • Strong growth in 1 and 2-person households in NI
                                                                              • Figure 11: Projected households, by number of persons, NI, 2006-21
                                                                            • Strongest growth in RoI was in 1-, 2- and 3-person households
                                                                              • Figure 12: Households, by number of persons, RoI, 1996-11
                                                                          • Competitive Context

                                                                            • Key points
                                                                              • Renting not favoured as a long-term option by consumers
                                                                                • Figure 13: Whether consumers wish to buy property in the future and when, RoI, February 2013
                                                                              • Three quarters of UK (incl. NI) renters hope to own property in ten years
                                                                                • Figure 14: Type of tenure aspired to by current private renters, two years and ten years, UK (incl. NI), 2012
                                                                              • Rents stay constant, while property prices decline sharply
                                                                                • Figure 15: Property sales and rental indices, RoI January 2006-December 2012
                                                                                • Figure 16: Rental index, NI, 2008-12
                                                                            • Strengths and Weaknesses

                                                                              • Strengths
                                                                                • Weaknesses
                                                                                • Market Size and Forecast

                                                                                  • Key points
                                                                                    • All-Ireland mortgage market down 28% on peak
                                                                                      • Figure 17: Value of outstanding mortgage debt, RoI, NI and All-Ireland, actual, forecast and projected, 2008-17
                                                                                    • £780 million in mortgage loans issued in NI in 2012
                                                                                      • First-time buyer activity reaches recent high in NI in 2012
                                                                                        • Figure 18: Number of mortgage loans issued to first-time buyers, NI, 2007-12
                                                                                      • 10% decline in number of second mortgages issued in NI in 2012
                                                                                        • €2.6 billion in mortgage loans in RoI in 2012 (down 93% on peak)
                                                                                          • Figure 19: Value of residential mortgage loans*, € million, RoI, 2005-12
                                                                                        • First-time buyers made up 50% of all RoI mortgage lending in 2012...
                                                                                          • Figure 20: Value of residential mortgage loans, by category of loan, € million, RoI, 2012
                                                                                        • Market has a very different complexion to 2007
                                                                                          • Figure 21: Type of mortgage as % of all residential mortgage lending, RoI, 2007 and 2012
                                                                                        • First-time buyer lending holding up better than other categories
                                                                                          • Figure 22: Value of residential mortgage loans, by category, €m, 2006-12
                                                                                        • Average RoI FTB mortgage value down 35% from peak
                                                                                          • Figure 23: Average value of residential mortgage loans to first-time buyers, € 000s, RoI, 2005-12
                                                                                        • Huge decline in quantity of mortgage loans issued in RoI
                                                                                          • Figure 24: Number of residential mortgage loans, 000s, RoI, 2005-12
                                                                                      • Market Segmentation

                                                                                        • Key points
                                                                                          • Variable rate mortgages most popular among Irish consumers
                                                                                            • Figure 25: Type of mortgage rate, NI and RoI, 2012
                                                                                          • More consumers taking up the tracker option
                                                                                            • Figure 26: Consumers with a tracker rate mortgage, NI and RoI, 2008-12
                                                                                          • Little change in number opting for variable rate mortgages
                                                                                            • Figure 27: Consumers with a variable rate mortgage, NI and RoI, 2008-12
                                                                                          • Decline in proportion of consumers opting for fixed rates
                                                                                            • Figure 28: Consumers with fixed-rate mortgages, 2 years and 3-5 years, NI and RoI, 2008-12
                                                                                          • Most consumers repaying capital plus interest
                                                                                            • Figure 29: Type of mortgage (form of repayment), NI and RoI, 2012
                                                                                        • Companies and Innovations

                                                                                            • Funding for lending scheme stimulates mortgage lending
                                                                                              • Lenders target first-time-buyers in New Year
                                                                                                • Mortgage Brain brings mortgages into the 21st Century
                                                                                                  • Company profiles
                                                                                                    • Allied Irish Bank (AIB) Group
                                                                                                      • Bank of Ireland (BoI) Group
                                                                                                        • Santander Group
                                                                                                          • Danske Bank
                                                                                                            • KBC Bank Ireland
                                                                                                              • Permanent TSB
                                                                                                                • Ulster Bank
                                                                                                                  • Halifax
                                                                                                                    • Nationwide
                                                                                                                      • HSBC
                                                                                                                      • Channels to Market

                                                                                                                        • Key points
                                                                                                                          • Preference for going direct when arranging mortgage
                                                                                                                            • Figure 30: How mortgage was arranged, NI and RoI, 2012
                                                                                                                          • Financial advisers more popular in NI than in RoI
                                                                                                                            • NI ABC1s more inclined to go direct, C2DEs to financial advisers
                                                                                                                              • Figure 31: Consumers who arranged mortgage direct from bank/building society and through financial adviser, by socio-economic background, NI, 2007-12
                                                                                                                            • Going direct becoming more popular among all consumers
                                                                                                                              • Figure 32: How mortgage was arranged, NI and RoI, 2007-12
                                                                                                                          • The Consumer – Ownership of Mortgages

                                                                                                                            • Key points
                                                                                                                              • Mortgage ownership in decline among Irish consumers
                                                                                                                                • Figure 33: Mortgage ownership, NI and RoI, 2008-12
                                                                                                                              • Mortgage ownership peaks among consumers aged 35-44
                                                                                                                                  • Figure 34: Mortgage ownership, by age, NI and RoI, 2012
                                                                                                                                • Employment and social status also key to mortgage ownership
                                                                                                                                  • Figure 35: Mortgage ownership, by socio-economic background and working status, NI and RoI, 2012
                                                                                                                                • Only very minimal mortgage activity in 2012
                                                                                                                                  • Figure 36: When mortgage was first taken out, NI and RoI, 2012
                                                                                                                                  • Figure 37: Mortgage taken out in the last 12 months, NI and RoI, 2007-12
                                                                                                                                • Consumers paying up to £699 monthly in NI, up to €1,499 in RoI
                                                                                                                                  • Figure 38: Monthly mortgage repayments, NI and RoI, 2012
                                                                                                                                • Small shift towards higher repayments in NI and RoI
                                                                                                                                    • Figure 39: Selected monthly mortgage repayments, NI and RoI, 2010-12
                                                                                                                                  • Most mortgages are ‘joint’ mortgages
                                                                                                                                    • Fewer consumers making changes to their mortgages
                                                                                                                                        • Figure 40: Consumers who have changed their mortgage account, NI and RoI, 2007-12
                                                                                                                                      • Most NI mortgages for 21-25 years, but more spread out in RoI
                                                                                                                                          • Figure 41: Length of time mortgage taken out for, NI and RoI, 2012
                                                                                                                                      • The Consumer – Attitudes Towards Finance

                                                                                                                                        • Key points
                                                                                                                                            • Figure 42: Agreement with statements relating to finance, NI and RoI, 2012
                                                                                                                                          • Downturn and debt weighing heavily on Irish minds
                                                                                                                                              • Figure 43: Agreement with statement ‘I don’t like the idea of being in debt’, by social class and working status, NI and RoI, 2012
                                                                                                                                            • RoI consumers more averse to debt since onset of crisis
                                                                                                                                              • Figure 44: Agreement with the statement, ‘I don’t like the idea of being in debt’, NI and RoI, 2007-12
                                                                                                                                            • Better awareness and knowledge since downturn
                                                                                                                                              • Figure 45: Agreement with the statement ‘I am more aware of personal finance than I used to be’, NI and RoI, 2007-12
                                                                                                                                            • Are RoI consumers losing trust in banks?
                                                                                                                                                • Figure 46: Agreement with statement ‘I trust banks/building societies to look after my money’, NI and RoI, 2009-12
                                                                                                                                              • Signs that RoI consumers might also be losing faith in banks
                                                                                                                                                  • Figure 47: Agreement with statement ‘It is important that my bank understands my individual needs’, NI and RoI, 2009-12
                                                                                                                                                • Tendency to take professional advice in decline among consumers
                                                                                                                                                    • Figure 48: Agreement with statement ‘I usually consult a professional financial adviser before deciding on financial matters’, NI and RoI, 2008-12
                                                                                                                                                • Appendix

                                                                                                                                                  • NI TGI usage tables
                                                                                                                                                    • Figure 49: Currently have mortgage, by all demographics, NI, 2012
                                                                                                                                                    • Figure 50: Person whose name the mortgage is under, by all demographics, NI, 2012
                                                                                                                                                    • Figure 51: When mortgage was first taken out, by all demographics, NI, 2012
                                                                                                                                                    • Figure 52: How long ago that mortgage was taken out, by all demographics, NI, 2012
                                                                                                                                                    • Figure 53: Type of mortgage owned, by all demographics, NI, 2012
                                                                                                                                                    • Figure 54: Type of mortgage owned, NI, 2008-12
                                                                                                                                                    • Figure 55: Type of mortgage rate, by all demographics, NI, 2012
                                                                                                                                                    • Figure 56: Type of mortgage rate, NI, 2008-12
                                                                                                                                                    • Figure 57: First property with mortgage, by all demographics, NI, 2012
                                                                                                                                                    • Figure 58: Monthly mortgage repayments, by all demographics, NI, 2012
                                                                                                                                                    • Figure 59: Consumers who have changed their mortgage account, by all demographics, NI, 2012
                                                                                                                                                    • Figure 60: Consumers who have changed their mortgage account, NI, 2008-12
                                                                                                                                                    • Figure 61: Increased value of mortgage since first taken out, by all demographics, NI, 2012
                                                                                                                                                    • Figure 62: How mortgage was arranged, by all demographics, NI, 2012
                                                                                                                                                    • Figure 63: How mortgage was arranged, NI, 2008-12
                                                                                                                                                  • RoI TGI usage tables
                                                                                                                                                    • Figure 64: Currently have mortgage, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 65: Person whose name the mortgage is under, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 66: When mortgage was first taken out, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 67: How long ago that mortgage was taken out, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 68: Type of mortgage owned, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 69: Type of mortgage owned, RoI, 2008-12
                                                                                                                                                    • Figure 70: Type of mortgage rate, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 71: Type of mortgage rate, RoI, 2008-12
                                                                                                                                                    • Figure 72: First property with mortgage, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 73: Monthly mortgage repayments, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 74: Consumers who have changed their mortgage account, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 75: Consumers who have changed their mortgage account, RoI, 2008-12
                                                                                                                                                    • Figure 76: Increased value of mortgage since first taken out, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 77: How mortgage was arranged, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 78: How mortgage was arranged, RoI, 2008-12
                                                                                                                                                  • NI finance statements
                                                                                                                                                    • Figure 79: Agreement with statements relating to finance, by all demographics, NI, 2012
                                                                                                                                                    • Figure 80: Agreement with statements relating to finance, by all demographics, NI, 2012 (continued)
                                                                                                                                                    • Figure 81: Agreement with statements relating to finance, by all demographics, NI, 2012 (continued)
                                                                                                                                                    • Figure 82: Agreement with statements relating to finance, by all demographics, NI, 2012 (continued)
                                                                                                                                                  • RoI finance statements
                                                                                                                                                    • Figure 83: Agreement with statements relating to finance, by all demographics, RoI, 2012
                                                                                                                                                    • Figure 84: Agreement with statements relating to finance, by all demographics, RoI, 2012 (continued)
                                                                                                                                                    • Figure 85: Agreement with statements relating to finance, by all demographics, RoI, 2012 (continued)
                                                                                                                                                    • Figure 86: Agreement with statements relating to finance, by all demographics, RoI, 2012 (continued)

                                                                                                                                                Companies Covered

                                                                                                                                                To learn more about the companies covered in this report please contact us.

                                                                                                                                                Mortgages - Ireland - March 2013

                                                                                                                                                US $1,417.92 (Excl.Tax)