The numbers of people seeking approval to buy a home showed signs of 'flatlining' in September, according to the Banking and Payments Federation.

The Federation said that 11,000 people drew down mortgages in the three months to September in what was considered to have been a fairly strong quarter for mortgage lending.

However, Frank Conway, founder of the Irish Financial Review and Moneywhizz, said it was still a fairly anaemic market. "The market has been recovering since the lowest point in 2011. It's been coming back slowly. Last year we had around 30,000 mortgages for first and second time borrowers and investors. In the overall context, looking back to the 1970s, we're looking at 1988 levels of lending. That's around 36,000 mortgage drawdowns for the full year," he said. 

Ideally, Frank Conway says we should be aiming for in or around 50,000 mortgage drawdowns a year. "Take the population growth from 1988 to now - around 1.2 million. We should be up at around 46,000 - probably a bit more. We're well off that track in terms of overall lending," he stated. 

In terms of the flat-lining concerns raised by the Banking and Payments Federation, the Central Bank lending rules appear to be squeezing potential buyers. "First-time buyers are hitting that ceiling of 3.5 times income multiple in terms of lending capacity. The other side is the supply of properties. That hasn't taken off."

So is it time to look at loosening the Central Bank lending restrictions? Not according to Frank Conway. "The Central Bank regulations are very good. They need a period of stability for people to work into - the biggest issue in the housing market is supply."

The banks here have come in for criticism over the high rates that they charge on mortgage borrowing compared to their European peers. Much of that has to do with the reluctance to repossess properties. "Repossession rates are very low here against the overall arrears rates. Lenders have worked with borrowers but the maths are problematic for them. They can't take back the property so it almost becomes a sort of unsecured lending," the money expert said. 

The high level of non-performing loans are likely to emerge as a problem for the Irish banks in the latest stress tests, the results of which are due to be published today. AIB and Bank of Ireland, however, are expected to fare better than the second and fourth positions from the bottom achieved in the last round of tests in 2011.

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