The Irish Mortgage Market – a changing landscape.

2022 was a year like no other for the mortgage market, with the first Interest rate hikes since 2011, the knock-on effects of the war in Ukraine, coupled with the exit of two major banking lenders from the Irish market having their demoralizing effects. Despite all that has happened in the mortgage space last year, it is not all bad news for 2023 and there are still opportunities for considering a mortgage.

The year in Summary

The cost of credit in early 2022 was very similar to that in the years previous. Interest rates were attractively low, and the mortgage market was a flurry of activity. Despite this activity, there was a sense of urgency, an urgency to brace for what’s coming down the tracks.  If those who were on the fence about switching lender or securing their new home in quarter 1 of 2022 had a crystal ball and predicted what was coming down the tracks, I am sure they will look back with regret, however they may not have missed the boat just yet.

In July 2022, The European Central Bank announced the first-rate increase since 2011, which was followed by a further 3 throughout the tail end of last year. These series of increases brought the ECB Interest rate from 0% up to its current rate at 2.5%. The ripple effect of the increases was felt throughout the market with non-banking lenders leading the charge in increasing their rates considerably and as of the time of writing, ICS, Avant money & Finance Ireland account for some of the highest fixed rates on the market. As 2022 progressed, we saw the pillar banks following suit in terms of their fixed rates. All pillar banks have held firm and are monitoring their variable rates, but no increases have been passed on as of yet.

What is in store for 2023?

Despite the negative undertone present throughout 2022, there are still some money saving deals available on the market. Although we touched on the pillar banks increasing their fixed rates, all three have cashback offerings attached to their fixed rate deals, which in the short term is an attractive proposition. Thankfully these cashback deals are here to stay, with Permanent TSB announcing their extension until 2024. It is worth noting, in some cases, once you come off your fixed rate with a pillar bank you will need to shop around due to their existing business rates.

There may also be an appetite for a variable interest rate with some very attractive products available at the moment ranging from 2.75% to 3.15% depending on your loan to value. If you can withstand the nature of uncertainty attached to a variable rate, it is an option worth considering but be conscious of potential increases coming down the tracks.  

The ECB hikes have not been kind to those that are currently on a tracker rate, with the hikes having a huge knock-on effect on monthly repayments. Despite this sudden pinch, there is a sense of short-term pain for some long-term gain. The tracker mortgage is still considered the gold standard mortgage for repayment value. Given the complexities of a tracker, I would highly recommend getting tailored advice if considering an alternative.

A welcome helping hand was announced for consumers through the extension of the help-to-Buy scheme for an additional two years. To ease the burden of house prices, the Central Bank of Ireland announced lending criteria changes. First time Buyers will now have access to 4 times their salary compared to 3.5 times from last year, subject to satisfactory criteria. Second time buyers will now be able to borrow up to 90% of their loan to value compared to last year’s criteria of 80%. The definition of a First Time Buyer (FTB’er) from the start of January 2023 has been amended. From a fresh start perspective, borrowers who are divorced/separated or have undergone bankruptcy/insolvency may be considered FTB’er for the mortgage measures. This criterion is subject to the individual no longer having an interest in the previous property. FTB’ers who get a top-up or re-mortgage with an increase in the principal may be considered FTB’ers, provided the property remains their primary residence. These new rules are a welcome addition to the mortgage market in 2023.  

We are expecting 2023 to be a very busy year and a year of growth, the bottom line is demand for property is still far in excess of supply.