Overall mortgage drawdown volumes declined in 2023, new figures from Banking and Payments Federation Ireland show, but the reduction was driven largely by a falloff in switching and remortgaging activity.
Mortgage holders moved to switch providers or mortgage products in record numbers towards the latter part of 2022 as the European Central Bank started to increase interest rates from the rock bottom levels they had sat at for many years up to that point.
Many borrowers moved to lock in for a period on a fixed rate mortgage in the second half of 2022 with a falloff in that number being reflected in the 2023 figures.
According to the BPFI figures, annual mortgage drawdown volumes fell by 17.2% to 43,587 in 2023 while approval volumes fell by 14.4% to 49,898.
"This drop was mainly due to a 63.5% decline in re-mortgage or switching activity in 2023, having more than doubled - up 107.7% - in 2022," Brian Hayes, CEO of the Banking and Payments Federation explained.
Activity in 2023 was driven by strong demand from first-time buyers with volumes and values among that cohort reaching their highest level since 2007.
25,591 mortgages were drawn down first time buyers in the year valued at over €7.2 billion, the figures show.
The average FTB mortgage drawdown in 2023 increased to €282,084, up from €264,621 a year earlier.
"This is the highest level since the data series began in 2003 and the tenth consecutive year in which it increased," Brian Hayes noted.
However, there was a decline in first time buyer activity in the final three months of the year with volumes down 2.3% year on year to 7,267 mortgages.
The value of those mortgages increased by 4.5% to just over €2.1 billion.
First-time buyers accounted for over 83% of home mortgages on new properties - the highest proportion since the data series began in 2005 - and 69.2% of home mortgages on secondhand properties, the figures show.
"Looking ahead for 2024, we expect housing and mortgage demand to remain strong, notwithstanding the expected slowdown in Irish economic growth," Brian Hayes said.
"We have seen housing output increasing significantly in the past two years and the potential output for 2024 looks encouraging, evident from the commencement activity which reached almost 33,000 units in 2023," he said.
"Increasing supply should also help average property price inflation ease during the year," he added.
Brian Hayes told RTÉ's Today with Claire Byrne show today that 60% of all mortgages written by banks and non banks across the sector were for first time buyers.
He said this marked a significant reversal of what happened in previous years, adding that the stand out fact within the mortgage book was that first time buyers are the dominant group.
Mr Hayes said the new macroprudential framework has made the mortgage book considerably safer as well as the entire lending environment. He said that the downside of this is that there is a group of people who will find it much harder to get credit in the future due to these rules.
"The State has got to continue to subsidise lending as a consequence of supporting first time buyers," he said.
Looking to 2024 trends, My Hayes said that there was an expectation of some moderation in ECB rates generally, as well are now at the top end of the cycle.
He said that move might help to give a bit more certainty but the key message is what can be done to provoke more supply.
"Unlike five or six years ago, the State is a much bigger actor now in terms of its supports to local authorities, to non-profit housing associations and the Land Development Agency and is a big player in the market in a way that it wasn't in the past," he said.
He also said the ramping up of social and affordable house building would take a huge effort and there is a role for credit institutes in that.
He said that he expected new revised targets soon from the Government on schemes like the help to buy and the first home schemes.
But he added that if the population continues to increase at its current rate between now and 2030, the population will be 6 million people.
"We need more houses certainly to deal with that very substantial change in demography," he added.
