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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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)