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Mortgages - Ireland - March 2019

Covered in this report

This rport examines the mortgage market in NI and RoI and analyses the main factors determining supply and demand for mortgage loans. This report discusses the factors that are driving and impeding demand for mortgages in NI and RoI.It examines the following areas of mortgage products:

  • Mortgage – a loan for house purchase secured against the property. This category includes lending to first-time purchasers, existing borrowers transferring their existing mortgage to another property and lending for BTL (buy-to-let) purposes.
  • Re-mortgage – this is where a mortgage borrower redeems his/her existing mortgage with their current lender and takes out a new mortgage on the same property with a different lender.

Types of mortgage based on method of repayment:

  • Repayment mortgage – this is where the borrower pays off both the amount borrowed (ie capital) and the interest charged each month.
  • Interest-only mortgage – this is where the borrower pays off the interest charged on the loan, but not the capital. Consequently, the borrower will still need to pay off the original loan at the end of the term, for example by using an investment scheme.

Types of mortgage based on interest rate:

  • Fixed rate – the interest payments are fixed for a set period of time, after which the borrower will be moved onto another rate, such as the lender’s standard variable rate.
  • Standard variable rate – the interest varies with the lender’s mortgage rate.
  • Tracker rate – the interest rate moves up or down by tracking an external rate, such as the Bank of England’s base rate or the European Central Bank's base rate.
  • Discounted rate – the interest rate varies with the lender’s standard variable rate, but the rate is also discounted for a set period of time.

"Over the next few years, the mortgage market will be characterised by relative caution and steadiness rather than anything dramatic. While demand for mortgages remains strong, uncertainty over Brexit - and, more specifically, the impact it may have on the general economy and consumers' personal financial situations - together with tight lending criteria will ensure things remain sedate and ordered."
– Brian O’Connor, Senior Consumer Analyst

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Table of contents

  1. Overview

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

          • The market
            • Figure 1: Value of outstanding mortgage debt, actual, estimated, forecasted, and projected, 2014-18
          • Forecast
            • Figure 2: Value of outstanding mortgage debt, actual, estimated, forecasted, and projected, 2014-24
          • Market factors
            • Economic growth, job creation, wage increases... but doubts, too
              • RoI consumers positive on economic outlook, NI consumers less so
                • A quarter of consumers could afford increased mortgage payments
                  • Property prices in NI and RoI recovering, but still short of peak
                    • Cost of mortgages comparatively high in RoI, lower in NI
                      • Companies and brands
                        • The consumer
                          • Mortgage ownership at 27% both in NI and RoI
                            • Figure 3: Consumers who, either on their own or with their partner, currently have a mortgage on the property they live in as their main home, December 2018, NI and RoI
                          • Preference for fixed-rate mortgages in NI, variable rate in RoI
                            • Figure 4: Type of mortgage currently held, NI and RoI, December 2018
                          • Many Irish consumers not considering mortgage application
                            • Figure 5: Whether consumers are considering applying for a mortgage or a re-mortgage within the next 12 months, NI and RoI, December 2018
                          • Interest rate key when choosing mortgage lender
                            • Figure 6: Factors that would influence choice of mortgage lender, November 2018
                          • Evidence of doubts and uncertainty in consumers’ minds
                            • Figure 7: Agreement with statements relating to mortgages and mortgage providers, December 2018
                        • The Market – What You Need to Know

                          • Economic prospects broadly positive – albeit with potential pitfalls
                            • More optimism among RoI consumers
                              • One quarter of consumers could absorb increased mortgage payments
                                • Property prices in Ireland up in 2018
                                  • Mortgage interest rates comparatively high in RoI, more affordable in NI
                                  • Market Size and Forecast

                                      • Value of outstanding mortgage debt to be almost €103 billion in 2019
                                        • Figure 8: Value of outstanding mortgage debt, actual, estimated, forecasted, and projected, 2014-24
                                      • Steady growth in RoI over next five years
                                        • Figure 9: Value of outstanding mortgage debt, actual, estimated, forecasted, and projected, 2014-24
                                      • Highest number of FTB mortgages in NI since 2004
                                        • Figure 10: Number of new mortgage loans, NI, 2016-18
                                        • Figure 11: Value of new mortgage loans, £ million, NI, 2016-18
                                      • Number of mortgage approvals up slightly
                                        • Figure 12: Mortgage approval volume, by mortgage type, RoI, November 2017 and November 2018
                                        • Figure 13: Mortgage approval value, by mortgage type, RoI, November 2017 and November 2018
                                    • Market Drivers

                                      • Both economies on course for growth
                                        • Figure 14: Economic growth forecast, NI and RoI, 2018-23
                                        • Figure 15: Employment forecasts, % change, NI and RoI, 2018-23
                                        • Figure 16: Wage forecasts, % change, NI and RoI, 2018-23
                                      • Economic improvement anticipated in RoI, decline anticipated in NI
                                        • Figure 17: Whether consumers believe that the general economic condition of NI/RoI will improve, stay the same, or decline over the next 12 months, NI and RoI, December 2018
                                      • RoI consumers more optimistic than NI consumers on personal financial situation
                                        • Figure 18: Whether consumers believe that their personal financial situation will improve, stay the same, or decline over the next 12 months, NI and RoI, December 2018
                                      • Majority of consumers rating finances as ‘OK’
                                        • Figure 19: How consumers rate their current financial situation, NI and RoI, December 2018
                                      • NI property prices defy expectations to rise more than 5% in 2018
                                        • Figure 20: House price index, NI, 2005-18
                                      • Average property price reached £133,000 in NI in 2018 – but still rising
                                        • Figure 21: Average house price, £ 000s, NI, 2005-18
                                      • RoI property prices up 6.5% in 2018, but still down 18% on 2007 peak
                                        • Figure 22: Residential property price index, nationwide-all property types, RoI, 2005-18
                                      • Interest rates on new mortgages in RoI second highest in Eurozone
                                        • Figure 23: Retail interest rates on outstanding mortgages, %, average, up to 1 year, 1-5 years and 5+ years, RoI, 2005-18
                                      • UK (including NI) mortgages rates lower than in RoI
                                        • Figure 24: Effective interest rate on new mortgages, %, January 2016-January 2019
                                        • Figure 25: Effective interest rate on stock of outstanding mortgages, %, January 2019
                                    • Companies and Brands – What you need to know

                                      • Historic tracker mortgage issues continue
                                        • HSBC and Santander grow total mortgage lending portfolio
                                          • Technology entering the mortgage application process
                                            • ‘No-deposit’ mortgages reintroduced to UK
                                            • Who’s Innovating?

                                              • Barclays Green Home mortgage offers discounts for energy efficiency
                                                • Operators in the UK launching guarantor mortgages
                                                  • Start-up CreditLogic trying to streamline mortgage applications in RoI
                                                  • Companies and Brands

                                                      • Allied Irish Bank/First Trust
                                                        • Key facts
                                                          • Product portfolio
                                                            • Recent developments
                                                              • Bank of Ireland
                                                                • Key facts
                                                                  • Product portfolio
                                                                    • Recent developments
                                                                      • Danske Bank
                                                                        • Key facts
                                                                          • Product portfolio
                                                                            • Recent developments
                                                                              • Halifax
                                                                                • Key facts
                                                                                  • Product portfolio
                                                                                    • Recent developments
                                                                                      • HSBC
                                                                                        • Key facts
                                                                                          • Product portfolio
                                                                                            • Recent Developments
                                                                                              • KBC Ireland
                                                                                                • Key facts
                                                                                                  • Product portfolio
                                                                                                    • Recent developments
                                                                                                      • Nationwide
                                                                                                        • Key facts
                                                                                                          • Product portfolio
                                                                                                            • Recent developments
                                                                                                              • Permanent TSB
                                                                                                                • Key facts
                                                                                                                  • Product portfolio
                                                                                                                    • Recent developments
                                                                                                                      • Post Office
                                                                                                                        • Key facts
                                                                                                                          • Product portfolio
                                                                                                                            • Progressive Building Society
                                                                                                                              • Key facts
                                                                                                                                • Product portfolio
                                                                                                                                  • Recent developments
                                                                                                                                    • Santander
                                                                                                                                      • Key facts
                                                                                                                                        • Product portfolio
                                                                                                                                          • Recent developments
                                                                                                                                            • Ulster Bank
                                                                                                                                              • Key facts
                                                                                                                                                • Product portfolio
                                                                                                                                                  • Recent developments
                                                                                                                                                  • The Consumer – What You Need to Know

                                                                                                                                                    • More than a quarter of all Irish consumers have a mortgage
                                                                                                                                                      • NI consumers opting for fixed-rate, RoI consumers for variable rate
                                                                                                                                                        • The rate of interest most important to consumers
                                                                                                                                                          • Consumers unsure about lending criteria and affordability
                                                                                                                                                          • Ownership of Mortgages

                                                                                                                                                              • Over a quarter of Irish consumers have an outstanding mortgage
                                                                                                                                                                • Figure 26: Consumers who, either on their own or with their partner, currently have a mortgage on the property they live in as their main home, December 2018, NI and RoI
                                                                                                                                                                • Figure 27: Mortgage ownership, NI and RoI, 2014-18
                                                                                                                                                              • Mortgage ownership highest among consumers aged 35-54
                                                                                                                                                                • Figure 28: Consumers who, either on their own or with their partner, currently have a mortgage on the property they live in as their main home, by gender and age, December 2018, NI and RoI
                                                                                                                                                              • More than a third of married/cohabiting consumers have mortgages
                                                                                                                                                                • Figure 29: Consumers who, either on their own or with their partner, currently have a mortgage on the property they live in as their main home, by marital status, December 2018, NI and RoI
                                                                                                                                                              • Mortgage ownership highest among full-time employees
                                                                                                                                                                • Figure 30: Consumers who, either on their own or with their partner, currently have a mortgage on the property they live in as their main home, by work status, December 2018, NI and RoI
                                                                                                                                                            • Type of Mortgage Owned

                                                                                                                                                                • Fixed-rate repayment leads NI market, variable rate repayment top in RoI
                                                                                                                                                                  • Figure 31: Type of mortgage currently held, NI and RoI, December 2018
                                                                                                                                                                • Preference for fixed-rate in NI, but variable/tracker tops in RoI
                                                                                                                                                                  • Figure 32: Type of mortgage currently held – fixed-rate or variable/tracker rate, NI and RoI, December 2018
                                                                                                                                                                • Significant minority of mortgage owners are on interest-only terms
                                                                                                                                                                  • Figure 33: Type of mortgage currently held – repayment or interest-only, NI and RoI, December 2018
                                                                                                                                                              • Future Intentions

                                                                                                                                                                  • Almost two thirds of consumers not intending on applying for a mortgage
                                                                                                                                                                    • Figure 34: Whether consumers are considering applying for a mortgage or a re-mortgage within the next 12 months, NI and RoI, December 2018
                                                                                                                                                                  • Consumers aged 25-34 least likely to be not considering application
                                                                                                                                                                    • Figure 35: Consumers who are not considering applying for a mortgage within the next 12 months, by gender and age, NI and RoI, December 2018
                                                                                                                                                                    • Figure 36: Consumers who are not considering applying for a mortgage within the next 12 months, by work status, NI and RoI, December 2018
                                                                                                                                                                  • C2DEFs most inclined to be not considering a mortgage application
                                                                                                                                                                    • Figure 37: Consumers who are not considering applying for a mortgage within the next 12 months, by social class, NI and RoI, December 2018
                                                                                                                                                                • Factors Influencing Choice of Mortgage Lender

                                                                                                                                                                    • Rate of interest the most important factor when choosing lender
                                                                                                                                                                      • Figure 38: Factors that would influence choice of mortgage lender, November 2018
                                                                                                                                                                    • Older consumers more likely than younger consumers to focus on rate of interest
                                                                                                                                                                      • Figure 39: Consumers who say the rate of interest is a factor that would influence their choice of mortgage lender, by gender and age, NI and RoI, December 2018
                                                                                                                                                                      • Figure 40: Consumers who say the rate of interest is a factor that would influence their choice of mortgage lender, by social class and gross annual household income, NI and RoI, December 2018
                                                                                                                                                                    • Reputation and recommendations also key when choosing provider
                                                                                                                                                                      • Figure 41: Consumers who say selected reputation and recommendation-related factors would influence their choice of mortgage lender, NI and RoI, December 2018
                                                                                                                                                                    • Flexibility and control appealing to significant minorities
                                                                                                                                                                      • Figure 42: Consumers who say selected payment flexibility-related factors would influence their choice of mortgage lender, NI and RoI, December 2018
                                                                                                                                                                  • Attitudes towards Mortgages and Related Issues

                                                                                                                                                                      • Lending criteria unclear
                                                                                                                                                                        • Figure 43: Agreement with statements relating to mortgages and mortgages providers, December 2018
                                                                                                                                                                      • Though there's stress involved, value of professional advice doubted
                                                                                                                                                                        • Figure 44: Agreement with selected statements relating to mortgage advice and mortgage arrangement, December 2018
                                                                                                                                                                      • Brexit-effects weighing heavier on minds of NI consumers
                                                                                                                                                                        • Figure 45: Agreement with statements relating to mortgages and Brexit-related issues, December 2018
                                                                                                                                                                      • Little evidence of loyalty, but no inclination to switch providers
                                                                                                                                                                        • Figure 46: Agreement with statements relating to transparency, trust and loyalty, December 2018
                                                                                                                                                                      • Concerns over affordability
                                                                                                                                                                        • Figure 47: Agreement with statements relating to mortgages, property and affordability, December 2018
                                                                                                                                                                    • Appendix – Data Sources, Abbreviations, and Supporting Information

                                                                                                                                                                      • Data sources
                                                                                                                                                                        • Generational cohort definitions
                                                                                                                                                                          • Abbreviations

                                                                                                                                                                          Mortgages - Ireland - March 2019

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