Average home loan now higher than at peak of Celtic Tiger era

The average mortgage taken out by homebuyers now stands at €284,623, according to figures from the Banking & Payments Federation Ireland (BPFI). In the first quarter of 2008, the average mortgage was €268,220.

For first-time buyers specifically, the average mortgage jumped to €270,658 last quarter, up from €243,271 a year ago.

The average mover mortgage rose to €315,463, up from €284,836 in the same period.

The record figures were revealed after the head of the Central Bank of Ireland recently admitted house prices were likely to increase further following a loosening of lending rules, and as European Central Bank (ECB) interest rate increases hike repayments for homeowners.

The rise in loan amounts over the last year illustrates how much more homebuyers have had to borrow in order to secure a place to live, even as some signs the market may have begun to cool have emerged as the number of properties for sale begins to increase.

More than €4bn was drawn down by borrowers during the third quarter of the year, according to the report. Last month more than 5,300 mortgage applications were given the green light, with almost half of these for first-time buyers (FTBs).

“This comes on the back of strong house price inflation and the continuing challenge of supply in the housing market,” said BPFI chief executive Brian Hayes.

“Interestingly when we look at the types of properties being purchased, we can see that FTBs have come to dominate the market for new/self-builds, accounting for 78.2pc of the value of home mortgages on new properties in Q3 2022.”

BPFI also reported that non-purchase mortgage activity, which includes switching and top-ups, soared by 115.8pc in volume terms in the third quarter of 2022 compared to the same period last year.

More than 5,000 homeowners were approved for a switch in the third quarter.

The value of these switcher approvals was €1.2bn, as many borrowers sought to head off the impact of interest rate rises, with the ECB putting up rates by another 0.75pc last week.

In September alone, the number of switchers rose to 1,717. In May, this figure was 1,237.

This activity has been driven by rising interest rates, as well as the planned withdrawal of both Ulster Bank and KBC from the Irish market.

In just over three months, rates have gone from zero to 2pc as the ECB tightened policy in order to bring inflation under control.

Tracker mortgage holders now face significantly higher payments from next month.

“Year on year we can see the number as well as the value of non-purchase mortgage drawdowns (which are mainly switching but also include top-ups) more than doubled in Q3 2022 reflecting the fact that mortgage customers are seeking out better rates in the wake of the interest rate increases recently announced by the ECB,” Mr Hayes said.

The interest rate during the first quarter of 2008, the last time mortgages peaked in Ireland, stood at 4pc before rising to 4.25pc that July.

Following the financial crash, the Central Bank in 2015 introduced new lending rules to prevent people borrowing beyond their means.

Earlier this month, the Central Bank announced it will ease mortgage lending rules for the first time since these measures were introduced in 2015.

First-time buyers can currently borrow up to three and a half times their income, but this will rise to four times their income from January.

Central Bank governor Gabriel Makhlouf admitted the rules change was likely to lead to a “modest” rise in house prices, which are already at levels last seen during the Celtic Tiger.

The average house listing price nationally stood at €311,514 in September, a rise from €287,704 last year, according to Daft.ie’s quarterly house price report last month. This also marked an increase from €263,750 in 2020.

However, house prices stabilised in the third quarter as a rising number of homes were placed on the market.

Daft.ie, figure show the number of properties available to buy across the country on September 1 was 15,461, up 22pc from the same time in 2021.