Only €9bn in new mortgage loans this year

The number of successful mortgage applications will continue to slide through next year, as British and other foreign-owned banks prepare to shut their doors on the home loans market here, mortgage brokers have predicted.

In new forecasts, the Independent Mortgage Advisers Federation (IMAF) predicts that mortgages advanced to first-time buyers and so-called trader-uppers or second-time buyers will drop this year to 50,000, equivalent to only €9bn in new loans, down from the 110,000 loans, or €23bn, advanced to the key borrowers in 2008.

In 2010, IMAF forecasts the new residential home loans market will hit its trough, with only 45,000 loans, or €8bn in new business, be completed in the year.

Michael Dowling of the IMAF said the slide was being drawn out because few lenders were seriously competing for first-time buyers and trader-uppers by offering competitive home loan rates. Foreign owned lenders, including Ulster Bank, First Active and Halifax, were deliberately pricing themselves out of the Irish home loans market and may even pull out completely, Dowling warned.

"Only three banks – AIB, Bank of Ireland and EBS – are competing on the ground, compared with 13 lenders a while ago. And it is questionable how long EBS will stay in the market because it needs more funding," said Dowling. "Others have priced themselves out, while Irish Permanent and Irish Nationwide have limited funds to compete. KBC Homeloans has similar problems," he said.

By offering expensive loan rates, Dowling said the foreign banks had signalled they were not competing.

"We do need another Irish-owned bank. IMAF would argue that the funds the government has earmarked for its Home Choice Loan scheme should be switched to another bank," he said.

Mortgage volumes for home purchases have slumped 75% from a peak of 204,000 loans, worth €40bn, in 2006, according to IMAF figures. In 2007, mortgage numbers fell to 158,000, worth €34bn in new business.