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Mortgage lending down 9% but confidence is still high

By Margaret Canning

Published 27/08/2015

Ulster Bank chief economist Richard Ramsey
Ulster Bank chief economist Richard Ramsey

Northern Ireland mortgage lending was down 9% in the second quarter of this year compared to the same period in 2014, according to figures from the Council of Mortgage Lenders (CML).

Mortgage deals were up 11% to 3,000 during the second quarter of the year compared to the first three months of 2015.

The CML said that was due to the usual seasonal dip of the start of the year.

But the number of loans was down 9% on the same period last year, while the value of the loans made was down 6.3% to £300m.

And half-year loans of 5,700 were still 57% below a 2006 peak of 13,200.

The mortgage figures come a week after the government's residential property price index recorded an increase in average house prices of 6% between the second quarter of 2014 and the second quarter of 2015.

According to yesterday's CML figures, first-time buyer loans in Northern Ireland showed the steepest fall of 15% to 1,700 loans.

However, remortgaging activity was up 23% to 1,600 loans, with the value of remortgages growing by a third to £160m.

Ulster Bank chief economist Richard Ramsey  said that the fall in house purchase loans was a disappointing sign for consumer confidence.

"The two biggest discretionary expenditure items are purchasing a new house or car. Both of these big ticket items have failed to record growth during the first half of the year. "

He said that 5,700 home loans had been advanced in the first six months of the year - a 5% fall on the first six months of 2014.

"The number of first-time buyer mortgages declined 15% year-on-year in the second quarter with over 8% fewer mortgages advanced in the six months to June relative to the same period last year.

"Meanwhile the home mover market has fared slightly better, albeit activity has been flat during the first six months of the year relative to last year.

"House loans are down and car sales have also been flat over the first half of the year, and both are bad signs for consumer confidence."

Paul Smee, director general of the CML, said remortgaging was now at its highest rate since the middle of 2011.

He said: "With an interest rate rise becoming more likely, it appears people are looking to secure competitively-priced mortgage deals.

"House purchase lending has increased compared to the first quarter which is unsurprising given the traditional lull in lending during the winter months.

"There was a decline year-on-year, but this is still the second best performing second quarter in Northern Ireland since 2007 and we have forecast activity to continue to pick up going forward."

Stephen Bloomfield, Danske Bank's deputy managing director of personal banking, said: "After a quiet first quarter it is no surprise that the overall figures for the number and value of loans for house purchases in Northern Ireland was up in the second quarter of 2015."

But he added: "We did not expect that across Northern Ireland there would be a slowdown in mortgage lending when compared to the same period last year. We remain confident that mortgage activity will increase further in the second half of this year."

He also predicted that first-time buyers and homeowners alike would aim to take advantage of low-interest rates in the light of recent Bank of England comments on rate rises.

Mr Bloomfield added: "The housing market has started to recover and it is encouraging to see more activity.

"While house prices have increased 6% year on year, they still represent good value for money and are still affordable enough for first time buyers to get a foot on the property ladder."

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