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Market Malfunction

What does this chart tell us about the Irish mortgage market?

New figures show a big jump in drawdowns, but concerns remain over the structure of the market.

MORE THAN HALF a billion euro was drawn down for mortgages in the three months of the year, new figures from the Irish Banking Federation show.

A total of €568 million was spread across 3,425 mortgages, with an average loan size of €165,909.

This is an increase of 71.6 per cent in value terms. In volume terms, or the total number of deals executed, there was a 65.6 per cent increase compared to the first quarter of 2013.

IBF chief executive Noel Brett said that the figures “provide further evidence that the market continues to recover.”

Divergence

However, the statistics show that more mortgages are being approved than drawn down, and the gap between the two continues to widen.

Brett said that he is “concerned that housing supply constraints in key locations are becoming a serious impediment to sustained growth”.

He continued: “This is reflected in the widening gap we see developing between the level of mortgage approvals and actual drawdowns.”

The €568 million, while a significant increase, still diverges sharply from the €780 million in approvals recorded for the first three months of the year.

A spokesperson for the IBF said that the divergence was most likely caused by the double or triple counting of mortgage applications.

In practice, this often means that multiple mortgage applications are approved for the same property by different banks, or if the same bank approves several applications for the same property.

Each of these is counted as an individual approval, but only one of them may eventually be drawn down.

So, it appears that the new draw down data not only shows that the market is performing better, but also that the limited housing pool is having a negative effect.

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