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New mortgages in Ireland predicted to fall by 30%

New mortgage business in the Irish Republic will fall by 30% this year, compared with 2006, according to the heads of two of the country’s largest home loan providers.

Irish Life & Permanent chief executive Denis Casey, whose Permanent TSB banking subsidiary has around a fifth of the market, said he expected it to lend €6bn in new mortgages this year, a sharp fall on the €8.7m provided in 2006 and the €7bn lent last year.

He estimated that lending volumes in 2008 would be some 15% lower than last year, which record-ed a 19% drop in new loans.

His counterpart at Ulster Bank, Cormac McCarthy, also predicted that new mortgage lending would be down by 15% this year, following a similar fall in 2007.

Figures from the Irish Central Bank added to the downbeat outlook. They show that the rate of mortgage borrowing in January hit a 14-year low, with less than €1bn issued in new loans.

In contrast, mortgages rose by more than €2bn a month throughout 2006 and by €1.4m last year, despite the property slump.

While the slowdown reflects the continuing fall in house prices, which has cut the demand for home loans, another significant dampening factor is a tightening of lending policies by the banks, alarmed by the turmoil on world money markets and high-profile warnings about their over-exposure in the property market.

The largest Irish banks are now reported to be holding credit committee meetings weekly, while lending managers are being asked to provide daily briefings on individual cases.

Concerns have been heightened by the difficulties facing developers. Many are unable to fund their borrowings because they are unable to sell their houses. Of the 370 firms that went into receivership or liquidation last year, more than a third were in the property and construction sectors.

The first of the high-profile warnings was delivered by the International Monetary Fund. In a recent report, it singled out the Irish Republic as one of the econ-omies in Europe most vulnerable to the crisis on international mon-ey markets.

The EU Commission was next to issue a caution, describing the Irish housing market as “the most pressing challenge facing the economy”.

A third warning came from UBS, which claimed Irish banks were “over-exposed to an overvalued property market”.


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