Two-thirds of mortgages approved last month were for first-time buyers, according to new figures.

The latest mortgage review from the Banking and Payments Federation of Ireland (BPFI) shows that 64% of mortgages approved last month were first-time buyers – the highest percentage ever recorded.

The review also finds a 72% decline in people switching or remortgaging in the last 12 months as the European Central Bank continues to raise interest rates.

On Breakfast Briefing, BPFI Chief Brian Hayes said 3,100 Of the 5,000 new mortgage approvals last month were first-time buyers.

"That's an extraordinary figure. It's the largest percentage and the largest number of first-time buyer mortgage approvals ever since we started to date, and it's over 10 years old," he said.

"It does show a very significant demand is there for housing."

Savings

In January 2023, changes in mortgage lending rules allowed first-time home buyers to borrow up to four times their income when applying for a mortgage.

Second-time buyers can borrow up to 3.5 their income, but they now only need a 10% deposit now.

Mr Hayes said it will take a year to determine whether the changes have been a factor in the increased demand.

"I think the bigger factor, however, is that the level of household savings pre-COVID were 10%, post-COVID – 20%," he said.

"That may have gone down in recent times in terms of total amounts of savings in the economy – about €170 billion, it has never been stronger.

"People are saving more. First-time buyers have to save more in order to get at least 10%."

02/11/2022 Pictured is Brian Hayes, CEO, Banking & Payments Federation Ireland, this morning at the Financial System Conference 2022 in the Aviva Stadium, Dublin. Photograph: Leah Farrell / RollingNews.ie

Financial crisis

Mr Hayes said the financial crisis was a catalyst to changes in banking – such as the mortgage lending rules – and outlined better standards of practice when it came to lending.

"[These are] rules that weren't just important in terms of keeping the banks safe, but also in keeping consumers safe for the long term," he said.

"Banks have to take the long-term view, they've got to make sure they land in a prudential way – they can't just lump on debt to people."

Mr Hayes also noted that there has been a "substantial reduction" in switching – the process of transferring investments from one fund or share class to another – since last year.

"There was a massive increase in switching last year ... people got ahead of the interest rate rise. They knew what was happening so they locked in for three years plus," he said.

2B2943J The Irish Central Bank Building at North Wall Quay,Dublin, overlooking the River Liffey.

House prices

Last year, the BPFI predicted there would be a decline in the acceleration of house price inflation.

"That's not a bad thing because it does give more space to first-time buyers who maybe stood back from the market post-COVID because they did see the double-digit house price increase," Mr Hayes told the show.

"Now they're seeing, if anything, a slight reduction in house prices."

Mr Hayes said it was not entirely clear what impact plateauing ECB interest rates will have on the housing market in the coming years.

"We're in a much safer place in Ireland because the ECB rates if one looks at the last year, have gone from zero to 4%," he said.

"Fixed rates on average have gone from 2.7% to 3.3% – so, we have actually been insulated somewhat because 63% of all mortgages are fixed anyway in Ireland.

"Secondly, the actual mammoth huge increase in fixed rates in the UK has led to this very substantial change in how consumers and borrowers have to pay back."