Huge slump in number of mortgages drawn down as switching falls off cliff

A slowdown in switching has led to a 20pc drop in the number of mortgages drawn down in the first three months of this year compared with the same period last year. This amounts to around 2,000 fewer mortgages, figures from the Banking and Payments Federation Ireland (BPFI) show.

Switching activity has fallen off a cliff in the wake of a record 10 hikes in European Central Bank rates.

By the start of this year, most of those in the market to switch – so they could lock into a lower fixed rate – had probably already done so. This is because the good-value fixed rates that were available have become more expensive.

BPFI figures show that from January to March, 8,419 new mortgages were drawn down by borrowers, to the value of €2.35bn. This is a 19.8pc decrease in volume and an 18pc fall in value on the corresponding quarter of 2023.

In the same three-month period last year, 10,493 mortgages were drawn down.

However, first-time buyers have remained active in large numbers this year. They are the largest segment by volume in the mortgage market, representing close to 60pc of drawdowns. Close to 5,000 first-time-buyer mortgages were drawn down in the quarter.

In contrast, remortgage and switching volumes fell by 53pc year on year.

Brian Hayes, chief executive of the BPFI, said there was an overall slowdown in mortgage drawdowns, with a drop in volume and values across all mortgage categories in the first quarter of this year.

“This was driven largely by switching, which was down by more than half,” he said.

The figures show the average mortgage on second-hand homes for first-time buyers was €274,535 in the period. This is the highest level since the data series began in 2005. For mover buyers, the figure is €327,069.

Mr Hayes said the first quarter of this year was the 33rd consecutive quarter in which the average first-time buyer mortgage on second-hand properties had increased in year-on-year terms.

A total of 3,779 buyers were approved for mortgages in March, 65pc of them first-time buyers. The number of mortgages approved in March rose by 5.5pc month-on-month and fell by 16.4pc year-on-year.

Mr Hayes said: “Despite the overall decline in activity, mortgage demand remains strong.”

He said there had been 15,297 applications to the Revenue Commissioners for the Help to Buy scheme in the first quarter of this year, compared with 9,585 applications in the first quarter of 2023.

But he said reports pointed to a shortage of second-hand homes supply.

Mortgage drawdown amounts are getting larger due to surging house prices.

The Central Statistics Office (CSO) recently reported a 2.6pc year-on-year drop in sales of second-hand properties in the first two months of this year. Residential property prices grew at the fastest annual pace in just over a year in February.