Mortgage lending at seven-year high

NEW mortgage lending has exceeded the amount of money being paid off existing home loans for the first time in seven years. Lending for house purchases rose by a net €27m in the last three months of last year. It was the first net increase in mortgage lending since the end of 2009.

Over the last seven years, mortgage debt being paid off has outstripped new mortgage lending. But mortgages for investment in buy-to-let properties fell by €394m in the final quarter of 2016. However, the fact that mortgages issued to buy residential properties was up by €449m, meant there was a net rise of €27m in lending for house purchases in the fourth quarter, the Central Bank said.

Most new borrowers are opting for a fixed-rate mortgage. Fixed-rate loans for homes recorded a net increase of €657m.

In contrast, variable rate loans recorded a fall of €208m.

“This reflects a current trend by borrowers to enter fixed-rate contracts in the current lower interest rate environment,” the Central Bank said. Savings by households rose by €1.8bn in the final three months of last year when compared with the same quarter a year ago. Households had €90.799bn on deposit in banks.

Meanwhile, the Government’s help-to-buy scheme is likely to cost more than originally expected. Based on average applications to date the cost of the scheme so far this year could be €56m.
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