Northern Ireland’s three-speed mortgage market finds a reverse gear

Two out of three categories of mortgage activity (first-time buyer, home mover and remortgage) posted faster rates of annual growth in Northern Ireland relative to the UK. However, these three segments of the mortgage market are moving at three different speeds.

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How will moving out of EU impact the housing market?

There has been a steady stream of negative news of late about consumer spending and consumer confidence. The latest car sales figures for Northern Ireland reveal that last month was the quietest for car showrooms in eight years. Meanwhile retail sales fell at their fastest pace in almost four years in February, according to the Ulster Bank PMI. And talk of food shortages and potential tariff-induced price rises if a no-Deal Brexit comes to pass will have done little to boost consumer sentiment. However, despite all of this, when we look at figures in relation to housing – the biggest discretionary consumer spending item of all – they appear to be at odds with everything else that is going on.

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Chart of the Month – 10 years since the property price peak

chart-of-the-month-mortgages

As we approach the 10th anniversary of Northern Ireland’s house price peak (and subsequent correction), we’ve been seeing some encouraging signs in the mortgage market.

2016 saw Northern Ireland notch up its fifth consecutive year of mortgage growth. According to the Council of Mortgage Lenders (CML) there were 13,800 loans advanced for house purchase. This represented a rise of over 5% year-on-year, with last year’s total representing the most mortgages advanced since 2007.

Despite a rise of 80 percent since 2008 though, mortgage volumes in Northern Ireland are still only half of what they were a decade ago.

The number of first-time buyers in Northern Ireland hit a 10-year high last year (8,000). However, this is still over 10,000 fewer than 2001’s peak.

The recovery in the mortgage market has been more marked within the First-Time Buyer (FTB) segment than the Home Mover market. The latter’s recovery has been somewhat disappointing.

In 2016, there were only 5,800 mortgages advanced in the Home Mover market; this was just 1/3rd of the volume of activity in 2006 and on a par with 1980/81. Lack of supply of certain property types and the legacy of negative equity are hampering this market.

House building is on the rise and people are gradually paying off their debt. But the legacy of what happened 10 years ago will continue to be felt for some time to come.

Chief Economist’s Weekly Brief – Delivering

The UK’s service sector delivered yet again in Q3, propelling the economy to a 0.5%q/q expansion. In the past five years service sector output has risen 14%. Not far behind the 17% rise in the five ‘boom’ years to 2008.  So it’s a robust performance. Higher inflation will provide a test over the coming year. But at least momentum is strong.

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