The past two years has seen a major change in the Irish mortgage market with a four-fold rise in the number of applications for new home loans.
That's according to Kevin McNerney, a mortgage expert with the Trusted Advisor Group who said that, "Our experience has been that the number of applications coming in from people looking to secure a mortgage has increased more than four-fold from where we were two years ago. The biggest difference however, is that, of these applications, over 90% are now being approved".
The mortgage experts say that a number of factors are leading to the increase in applications - one of which is, surprisingly, down to consumer confidence.
"People's confidence in their employment prospects seems to be on the up. From speaking with potential borrowers, most people now feel that the likelihood of them being made redundant is very low and that even if this were to happen there would most likely be other jobs out there for them. In addition, we are coming across a lot of people who have been renting for years and who have held off purchasing a property in recent times due to market uncertainty.
"A lot of people don't want to wait any longer and feel that now is the time to buy a property of their own. The rental market has remained quite strong over the last few years while property prices were plummeting, so people are still shelling out significant sums of money on a monthly basis to rent out properties. With mortgage rates now at an all-time low, in many cases it is now cheaper to repay a mortgage on a monthly basis than it is to rent a similar property".
The Trusted Advisor Group say that the impending abolishment of the mortgage interest relief that is currently available to first time buyers is also a factor in people's decision to apply for a mortgage. At present, when someone gets a mortgage they are entitled to relief from the Revenue up to a maximum of €208 per month for a single person (€416pm for a couple) and they will get this on a reducing basis until the end of 2017. However, this relief is being abolished on the 31st December this year meaning that if you draw down a mortgage after this date you are not entitled to any relief. On a variable rate mortgage of €250,000 the relief would be worth over €10,000 to borrowers over a five year period.
"All of these factors, in particularly the mortgage interest relief, have led people to look for mortgage approval so that they can secure a property and have everything in order to close before the cut-off date of the 31st December. This is a situation that we have not seen for probably five years. We have many clients coming back to us in recent weeks saying that they having difficulty in finding a property," said Mr McNerney.
"This week alone I had three calls from clients who had been bidding on properties but were unsuccessful. All of the three properties were sale agreed for between 10pc-20pc above the asking price. This seems to be something that is happening a lot more of late. From speaking with estate agents they are saying that there is a big shortage of properties to sell in certain areas."
The mortgage expert contends that the biggest stumbling block in the mortgage market in the last 12 - 24 months now appears to be lifting - banks are lending again. However, the banks are looking for a lot of information and detail from borrowers before they will give an approval so mortgage brokers need to spend a lot of time vetting mortgage applications before they are submitted to the banks.
"Rather than just looking at someone's salary, they now want to know about the company they work for, how secure is that company, how long have they been working there; what level of savings have the applicants accumulated and how much have they been saving each month on a regular basis; have they been paying rent and for how long. They will look at the monthly savings combined with any rent payments and together this will prove what people can afford to pay on a monthly basis. You may have a strong salary but if you have not proven you can manage making a large payment each month then you may not be considered until this has been demonstrated."
