Where is the mortgage market heading?

As humans we love routine and are often opposed to change. When it comes to switching your mortgage I would always recommend to clients to review their mortgage and always shop around for a better rate. You could make significant savings on your mortgage if you switch to a lower interest rate. If you have a €300k mortgage at 3% you will be paying the bank €155k interest on top of the €300k loan. If you switch to a reduced rate you will save yourself a lot more and could use that extra money to enhance your financial situation by putting it into your pension and letting it grow tax free or into a child’s savings plan so you can fund an education for your children. I would always recommend going on a fixed rate as variable rates tend to be much higher. The lower the term the better as you will owe a lot less interest.

Where is the mortgage market heading seems to be the question on everyone’s mind. The truth is that nobody can be certain exactly where it’s going and experts have all chimed in with their contrasting opinions which further indicates that nobody is entirely sure. However, I certainly wouldn’t recommend to those who are looking to purchase a property to put their plans on hold for a couple of years in hope that a housing prices go down.

I have seen recently some well renowned economists encouraging those who are looking to buy a property to go abroad for a few years and hope that the housing crisis is cleared up by the time they return. I would strongly advise against this as it’s a gamble. The demand for houses in Ireland at the moment heavily outweighs supply and due to the closure of building sites caused by Covid-19 I can’t see supply meeting demand for a number of years. The knock on effect of building sites being closed is that developers will have faced costly interest bills as their sites were closed and these costs will be passed onto the buyer in some shape or form in my opinion.

When we hear the word ‘’recession’’ we instantly compare it to the crash in 2008 where housing prices fell by 6.9%, and a further 18.1% in 2009, and continued to drop until 2012. It wasn’t until 2014 that housing prices started to increase again.  People need to understand that the 2018 crash is completely different to now. Demand for houses was low in 2008 as banks were not willing to lend hence the drop in housing prices.

The factors that affect demand on prices all suggest that housing prices will continue to rise. Ireland at the moment has record low interest rates and banks are continuing to lend. Mortgage drawdowns and approvals have been strong in 2021 and with the introduction of Avant bank offering 2.1% fixed rate, one can hope that this might encourage more competition to enter the market and a further reduction in interest rates from competitors such as Bank of Ireland, AIB, and EBS. Ireland’s GDP remained positive in 2020 as we were the only EU economy to grow during the pandemic and experts predict that our GDP to grow by 3.4% this year and 3.5% in 2022. Although unemployment rate hit an all-time high in 2020, households still managed to save more money than ever before. Household savings increased by €1b in the fourth quarter of 2020 according to the Central Bank .As of Monday, May 10th, the economy is starting to open back up and hopefully the majority of those unemployed will retain their jobs. These factors and a steady growth in GDP leads me to believe that house prices will continue to steadily rise over the next few years.

There has been a lot of frustration throughout the country that foreign funds are buying up housing estates and properties tax free in order to rent them. These funds are out bidding anyone looking to buy a property to live in. Unfortunately this has been happening since about 2013 and the Government are showing no signs of putting a stop to it. The mortgage market is a cruel and unfair place and it’s not looking likely that it will improve anytime soon. We are a long way off our European counterparts still as Irish consumers are still paying highest mortgage rates in Europe. However, for those who want to live in Ireland this is unfortunately the price we must pay. For anyone who is planning on applying for a mortgage I would advise them to act now as opposed to waiting a few years as I can’t see things changing for quite some time.



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