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Mortgages - Ireland - March 2016

“Although the Irish mortgage market has re-established itself following the turmoil of the post-financial crisis and recession years, the value of outstanding mortgage lending is – perhaps surprisingly – in subtle decline. Although mortgage lending is increasing, it nonetheless trails the prevailing level of repayments."
Brian O’Connor, Senior Consumer Analyst

This report looks at the following areas:

  • PR and other benefits to saving what could be a lost generation
  • Are lenders at risk of losing touch with younger consumers?
  • Prevalence of interest-only mortgages could spell trouble

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Table of contents

  1. Overview

    • What you need to know
      • Products covered in this Report
      • Executive Summary

          • The market
            • Figure 1: Value of outstanding mortgage debt, All-Ireland, NI and RoI, 2011-2020
          • Forecast
            • Figure 2: Indexed value of outstanding mortgage debt, All-Ireland, NI and RoI, 2011-20
          • Market factors
            • Economic growth leading to job creation and confidence
              • Interest rates not as low as they theoretically should be
                • Property prices increasing – But affordability better than before
                  • Arrears and repossessions remain a problem in NI and RoI
                    • The consumer
                      • Mortgage ownership at 38% in NI, 33% in RoI
                        • Figure 3: Ownership of mortgage on current property, RoI and NI, February 2016
                      • Repayment mortgages favoured by 65% in RoI, 60% in NI
                        • Figure 4: Types of mortgages currently owned by consumers, RoI and NI, February 2016
                      • Majority of consumers have no intention of applying for a mortgage
                        • Figure 5: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, RoI and NI, February 2016
                      • Consumers turning to professionals for advice on mortgages
                        • Figure 6: Sources of advice used by consumers for their last mortgage or remortgage of their main property, NI and RoI, February 2016
                      • What it means
                      • Issues and Insights

                        • PR and other benefits to saving what could be a lost generation
                          • The facts
                            • The implications
                              • Are lenders at risk of losing touch with younger consumers?
                                • The facts
                                  • The implications
                                    • Prevalence of interest-only mortgages could spell trouble
                                      • The facts
                                        • The implications
                                        • The Market – What You Need to Know

                                          • Economic growth leading to job creation and confidence
                                            • Interest rates not as low as they theoretically should be
                                              • Property prices increasing – But affordability better than before
                                                • Arrears and repossessions remain a problem in NI and RoI
                                                • Market Size and Forecast

                                                  • Total mortgage market worth around €108 billion (£90 billion) in 2015
                                                    • Figure 7: Value of outstanding mortgage debt, All-Ireland, NI and RoI, 2011-2020
                                                  • Outstanding mortgage value to reach around €115 billion by 2020
                                                    • Figure 8: Indexed value of outstanding mortgage debt, All-Ireland, NI and RoI, 2011-20
                                                  • The MMR and MCD
                                                    • NI mortgage activity reached recent peak in Q4 2015
                                                      • Figure 9: Total number of loans advanced for house purchase, NI, Q4 2012-Q4 2015
                                                    • Number of NI mortgage loans tops 13,000 in 2015
                                                      • Figure 10: Total number of loans advanced for house purchase, NI, 2011-15
                                                    • NI mortgage loans issued in Q4 2015 worth £380 million
                                                      • Figure 11: Total value of loans advanced for house purchase, £m, NI, Q4 2012-Q4 2015
                                                    • Value of mortgage loans issued in 2015 steady at £1.3 billion
                                                      • Figure 12: Total value of loans advanced for house purchase, £m, NI, 2011-15
                                                    • First-time buyers constitute bulk of mortgage borrowers in NI in 2015
                                                      • Figure 13: Total number of loans advanced for house purchase, NI, 2011-15
                                                    • NI first-time buyers borrowing 7% more in 2015 than in 2014
                                                      • Figure 14: Average mortgage loan size, first-time buyers and home movers, NI, Q4 2014-Q4 2015
                                                    • NI first-time buyers borrowing 2.8 times their income in Q4 2015
                                                      • Figure 15: Average loan-to-income, first-time buyers and home movers, NI, Q4 2014-Q4 2015
                                                    • RoI's volume of mortgages issued up 24% in 2015
                                                      • Figure 16: Volume of mortgage loans, by category, RoI, Q3 2013-Q4 2015
                                                    • Continued growth in number of mortgage approvals in RoI
                                                      • Figure 17: Annual mortgage approval volumes, RoI, 2011-15
                                                    • First-time buyers emerging as main force in RoI mortgage market
                                                      • Figure 18: Mortgage loan borrower type, RoI, 2011-15
                                                    • RoI's value of mortgage loans issued up 26% in 2015
                                                      • Figure 19: Value of mortgage loans, by category, RoI, Q3 2013-Q4 2015
                                                    • First-time buyer and mover purchaser mortgages account for 85% of value
                                                      • Figure 20: Value of mortgage loans, by category, RoI, Q4 2015
                                                    • RoI market size in reverse due to repayments exceeding drawdowns
                                                      • Figure 21: Mortgage drawdowns and net mortgage transactions, €m, RoI, Q3 2013-Q4 2015
                                                    • Affordability a bigger challenge for Dublin consumers
                                                      • Figure 22: House price affordability, price to income multiple, RoI, Q4 2015
                                                  • Market Drivers

                                                    • Economic recovery leading to employment growth in NI and RoI
                                                      • Figure 23: Unemployment rate, %, NI, Q4 2005-Q4 2015
                                                      • Figure 24: Numbers in employment, 000s, NI, September 2012-November 2015
                                                      • Figure 25: Unemployment rate, %, RoI, December 2013-December 2015
                                                    • Base rates on the floor – But not all borrowers gaining to the full
                                                      • Figure 26: Base interest rates, ECB and BoE, January 2008-January 2016
                                                    • Mortgage cost down around a third for NI consumers over last six years
                                                      • Mortgage rates in RoI higher than anywhere else in the EU
                                                        • Property prices recovering but still below economic boom levels
                                                          • Figure 27: Residential property price index values, NI, Q4 2007-Q4 2015
                                                        • NI property more than twice as affordable in 2015 as it was in 2007
                                                          • Figure 28: Ratio of median residential property sale price to median annual gross annual earnings, NI, 2005-15
                                                        • Transaction activity not yet returned to NI property market
                                                          • Figure 29: Number of residential property sales, NI, 2007-15
                                                        • NI house price growth of 5% forecast for 2016
                                                          • RoI residential property prices up 10.6% in 2015
                                                            • Figure 30: Residential property price index, RoI, 2005-15
                                                          • RoI property price growth expected to moderate significantly in 2016
                                                            • Residential rents approaching pre-recession high point in RoI
                                                              • Figure 31: Residential rental index, RoI, 2006-15
                                                            • Availability of properties to rent down significantly on recent years
                                                              • Rental yields of more than 10% available on RoI residential property
                                                                • Figure 32: Rental yields, one-bed apartment, main cities, RoI, 2015
                                                              • More than 8% of all RoI mortgages are in arrears for more than 90 days
                                                                • Figure 33: Percentage of mortgage loan accounts in arrears for more than 90 days, volume and value, RoI, Q4 2012-Q4 2015
                                                              • Almost 50,000 mortgage accounts in very severe difficulty
                                                                • Figure 34: Length of arrears in residential mortgage arrears cases outstanding, RoI, Q4 2015
                                                              • Repossessions continuing to rise in RoI
                                                                • Figure 35: Residential properties in possession, end of Q4, 2012-15
                                                              • Home repossessions in NI far higher than 2007 level
                                                                • High level of restructurings keeping arrears and repossessions down
                                                                  • Figure 36: Total residential mortgage accounts restructured, Q4 2012-Q4 2015
                                                                • Almost one in five investment mortgages in arrears in RoI
                                                                  • Figure 37: Percentage of buy-to-Let residential mortgage loan accounts in arrears for more than 90 days, RoI, 2012-15
                                                              • Key Players and Competitive Strategies – What You Need to Know

                                                                  • Permanent TSB offers 3 in 1 mortgage
                                                                    • Bank of Ireland offers top-up savings
                                                                      • New lender Pepper enters the market
                                                                        • HSBC launches one-day in-branch mortgage approval
                                                                          • AIB reduces variable rates while BoI reduces fixed rates
                                                                            • The future of mortgages is online
                                                                              • Bank of Ireland enters into partnership with AA
                                                                                • Halifax offers cashback and reduced rates
                                                                                  • Santander increases LTV limits on flats
                                                                                  • Competitive Strategies

                                                                                      • Permanent TSB offers 3 in 1 mortgage
                                                                                        • Bank of Ireland offers top-up savings
                                                                                          • New lender Pepper enters the Irish mortgage market
                                                                                            • HSBC one-day in-branch mortgage approval
                                                                                              • AIB reduces variable interest rates while Bank of Ireland reduces fixed interest rates
                                                                                                • The future of mortgages is online
                                                                                                • Companies and Brands

                                                                                                    • Allied Irish Bank
                                                                                                      • Key facts
                                                                                                        • AIB mortgage products
                                                                                                          • First Trust mortgage products
                                                                                                            • Recent developments
                                                                                                              • Bank of Ireland
                                                                                                                • Key facts
                                                                                                                  • Mortgage products
                                                                                                                    • Recent developments
                                                                                                                      • Danske Bank
                                                                                                                        • Key facts
                                                                                                                          • Mortgage products
                                                                                                                            • Recent developments
                                                                                                                              • Halifax
                                                                                                                                • Key facts
                                                                                                                                  • Mortgage products
                                                                                                                                    • Recent developments
                                                                                                                                      • HSBC
                                                                                                                                        • Mortgage products
                                                                                                                                          • KBC Ireland
                                                                                                                                            • Key facts
                                                                                                                                              • Mortgage products
                                                                                                                                                • Recent developments
                                                                                                                                                  • Nationwide
                                                                                                                                                    • Key facts
                                                                                                                                                      • Mortgage products
                                                                                                                                                        • Permanent TSB
                                                                                                                                                          • Key facts
                                                                                                                                                            • Mortgage products
                                                                                                                                                              • Recent developments
                                                                                                                                                                • Santander
                                                                                                                                                                  • Key facts
                                                                                                                                                                    • Mortgage products
                                                                                                                                                                      • Recent developments
                                                                                                                                                                        • Ulster Bank
                                                                                                                                                                          • Key facts
                                                                                                                                                                            • NI mortgage products
                                                                                                                                                                              • RoI mortgage products
                                                                                                                                                                                • Recent developments
                                                                                                                                                                                • The Consumer – What You Need to Know

                                                                                                                                                                                  • Mortgage ownership at 38% in NI, 33% in RoI
                                                                                                                                                                                    • Repayment mortgages favoured by 65% in RoI, 60% in NI
                                                                                                                                                                                      • Majority of consumers have no intention of applying for a mortgage
                                                                                                                                                                                        • Consumers turning to professionals for advice on mortgages
                                                                                                                                                                                        • The Consumer – Ownership of Mortgages

                                                                                                                                                                                          • More than a third of Irish consumers currently hold a mortgage
                                                                                                                                                                                            • Figure 38: Ownership of mortgage on current property, RoI and NI, February 2016
                                                                                                                                                                                          • Mortgage ownership at peak among consumers aged 35-54
                                                                                                                                                                                            • Figure 39: Ownership of mortgage on current property, by gender and age, RoI and NI, February 2016
                                                                                                                                                                                          • Mortgage ownership highest among ABC1s and those in employment
                                                                                                                                                                                              • Figure 40: Ownership of mortgage on current property, by work status, RoI and NI, February 2016
                                                                                                                                                                                              • Figure 41: Ownership of mortgage on current property, by social class, RoI and NI, February 2016
                                                                                                                                                                                            • Ownership significantly higher among married/cohabiting consumers
                                                                                                                                                                                              • Figure 42: Ownership of mortgage on current property, by marital status, RoI and NI, February 2016
                                                                                                                                                                                          • The Consumer – Type of Mortgages Owned

                                                                                                                                                                                            • Strong preference for repayment over interest-only mortgages
                                                                                                                                                                                              • Figure 43: Types of mortgages currently owned by consumers, RoI and NI, February 2016
                                                                                                                                                                                            • Preference for variable/tracker rates in RoI, fixed rates in NI
                                                                                                                                                                                            • The Consumer – Future Intentions

                                                                                                                                                                                              • Around three quarters unlikely to take out mortgage in coming year
                                                                                                                                                                                                • Figure 44: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, RoI and NI, February 2016
                                                                                                                                                                                              • No change in RoI consumers' mortgage intentions
                                                                                                                                                                                                • Figure 45: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, RoI, December 2014 and February 2016
                                                                                                                                                                                              • Significant decline in intent among NI consumers
                                                                                                                                                                                                • Figure 46: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, NI, December 2014 and February 2016
                                                                                                                                                                                              • Only one in 50 intending to borrow to invest in property
                                                                                                                                                                                                • Resistance to applying lowest among consumers aged 25-44
                                                                                                                                                                                                  • Figure 47: No intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, by gender and age, RoI and NI, February 2016
                                                                                                                                                                                                • Work status and class important factors in determining intent
                                                                                                                                                                                                  • Figure 48: No intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, by work status, RoI and NI, February 2016
                                                                                                                                                                                                  • Figure 49: No intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, by social class, RoI and NI, February 2016
                                                                                                                                                                                                • Help to Buy ISA scheme appealing to first-time buyers in NI
                                                                                                                                                                                                  • Figure 50: Use of or intention to use government Help to Buy ISA scheme for first-time buyers, NI, February 2016
                                                                                                                                                                                              • The Consumer – Arranging Mortgages

                                                                                                                                                                                                • Preference for direct, professional advice when taking out mortgages
                                                                                                                                                                                                  • Figure 51: Sources of advice used by consumers for their last mortgage or remortgage of their main property, NI and RoI, February 2016
                                                                                                                                                                                                • Older consumers using advisers from banks/building societies
                                                                                                                                                                                                  • Figure 52: Consumers who used an adviser from the bank/building society that provided the mortgage for their last mortgage or remortgage of their main property, by age and social class, RoI, February 2016
                                                                                                                                                                                                • Self-employed and part-time employees consulting brokers
                                                                                                                                                                                                  • Figure 53: Consumers who used a specialist mortgage broker for their last mortgage or remortgage of their main property, by age and work status, RoI, February 2016
                                                                                                                                                                                                • Younger consumers and C2DEFs seeking advice from friends/family
                                                                                                                                                                                                    • Figure 54: Consumers who consulted family or friends for their last mortgage or remortgage of their main property, by age and social class, RoI, February 2016
                                                                                                                                                                                                • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                                                                                                                  • Market size rationale
                                                                                                                                                                                                    • Data sources
                                                                                                                                                                                                      • Abbreviations
                                                                                                                                                                                                      • Appendix – The Consumer

                                                                                                                                                                                                        • NI Toluna data
                                                                                                                                                                                                          • Figure 55: Ownership of mortgage on current property, by demographics, NI, February 2016
                                                                                                                                                                                                          • Figure 56: Types of mortgages currently owned by consumers, by demographics, NI, February 2016
                                                                                                                                                                                                          • Figure 57: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, by demographics, NI, February 2016
                                                                                                                                                                                                          • Figure 58: Use of or intention to use government Help to Buy ISA scheme for first-time buyers, by demographics, NI, February 2016
                                                                                                                                                                                                          • Figure 59: Sources of advice used by consumers for their last mortgage or remortgage of their main property, by demographics, NI, February 2016
                                                                                                                                                                                                          • Figure 60: Sources of advice used by consumers for their last mortgage or remortgage of their main property, by demographics, NI, February 2016 (continued)
                                                                                                                                                                                                        • RoI Toluna data
                                                                                                                                                                                                          • Figure 61: Ownership of mortgage on current property, by demographics, RoI, February 2016
                                                                                                                                                                                                          • Figure 62: Types of mortgages currently owned by consumers, by demographics, RoI, February 2016
                                                                                                                                                                                                          • Figure 63: Intention to apply for a mortgage (ie for a first home or buy-to-let purchase) or a remortgage for their current home within the next 12 months, by demographics, RoI, February 2016
                                                                                                                                                                                                          • Figure 64: Sources of advice used by consumers for their last mortgage or remortgage of their main property, by demographics, RoI, February 2016
                                                                                                                                                                                                          • Figure 65: Sources of advice used by consumers for their last mortgage or remortgage of their main property, by demographics, RoI, February 2016 (continued)

                                                                                                                                                                                                      Companies Covered

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

                                                                                                                                                                                                      Mortgages - Ireland - March 2016

                                                                                                                                                                                                      US $1,411.13 (Excl.Tax)