The number of people approved for a mortgage shot up last month as new rules on lending and the Government’s help-to-buy scheme kicked in.
A total of 2,861 people were approved to borrow to buy a home in January, up 47pc on the same month last year, according to figures from the Banking and Payments Federation of Ireland.
January is traditionally a slow month for borrowing and house sales.
But a relaxation in the Central Bank lending limits took effect in January, and the Government’s tax rebate came into operation in the same month.
Almost half of those getting approval from a bank to borrow were first-time buyers.
New buyers have been struggling with surging rents and the difficulties of getting a deposit together. This had meant that their share of the mortgage market had fallen in recent years.
The new figures show €513m of loans were approved for house purchases in January, up 59pc on the year.
This reflects higher housing prices and the fact that buyers are now able to borrow more due to the change in lending limits and the Government’s tax rebate scheme.
From the start of this year, first-time buyers can get approval with a 10pc deposit. Up to December, they needed a 20pc deposit for amounts borrowed over €220,000.
Some 3,000 new buyers have applied for the help-to-buy scheme. It offers a 5pc tax rebate on the purchase of a new home for eligible applicants, up to a maximum of €20,000.
There are 55 developers approved for the scheme, Finance Minister Michael Noonan told the Dáil last week.
The data from the banks shows the average loan approval fell slightly on the month to €208,100 from €216,400 in December.
But in January the average mortgage approval for first-time buyers was €199,100, up 14pc on the year.
Average loan sizes for first-time buyers have been going up for a while, reflecting the shortage of properties for sale.
Economist with Goodbody Stockbrokers Dermot O’Leary said the amount of debt being taken on by new buyers has been going up for a while, and so cannot be automatically attributed to the introduction of the help-to-buy scheme.
First-time buyers had an average deposit of 21pc of the value of the home, well below the 10pc threshold.
Economist with Davy Stockbrokers Conall Mac Coille said the help-to-buy scheme and loosening of the Central Bank’s lending rules have led to expectations for house price inflation being revised upwards.
“With no restrictions on the availability of 90pc loan-to-value mortgages to first-time buyers, the clear trend has been that potential buyers are taking out higher levels of mortgage debt,” he said.
The figures show there was a rise in mortgage switchers, but off a low base.
Some 207 homeowners got the all-clear to move their mortgage in January, but this was only 8pc of the number of mortgage approvals.
Economists at specialist bank Investec now expect some €7bn in mortgage lending across all banks this year.
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