Mortgages - Ireland - August 2007

ISSUES IN THE MARKET
Key themes of the report:
Definitions
Conversion factors
Abbreviations
INSIGHTS AND OPPORTUNITIES
Help with foreign house purchases
Retain consumers with gifts or incentives
Appeal to the heart not the head
MARKET IN BRIEF
Interest rates will slow the market
Mortgage lending triple in RoI to €25 billion
Mortgage lending in NI reaches €2.1 billion
Short term growth lies in desire to remortgage
Housing reaching the limits of affordability
Is the property market boom over?
FAST FORWARD TRENDS
 TREND 1: HOME AS PENSION
Definition
Context: general observations
What next?
 TREND 2: HOME-A LOAN?
Definition
Context: general observations
What next?
STRENGTHS AND WEAKNESSES IN THE MARKET
INTERNAL MARKET ENVIRONMENT
Key Points
Fewer FTBs to drive the market
Figure 1: proportion of FTBs to house sales, NI and RoI, 2000-06
Means fewer fresh links in the chain
Figure 2: Number of home loans made to FTBs, NI and RoI, 2001-06
Investors pick up the slack
Focus turns to existing homeowners
Some FTBs seek to remortgage quickly
The Internet: from information source to selling tool
Figure 3: Percentage of adults using the Internet, either at home or at work, NI and RoI, 2001-06
Online mortgage arrangement to grow
Sub-prime mortgages grow in RoI
Planning laws to boost NI equity release market
Republic says farewell to stamp duty
Mortgages starting later
Figure 4: Average age of first time buyers, UK, 1974-2005
FTBs become older…
…as major lifestages start later
Potential for mortgages to end later as well
Some consumers seek to repay mortgages early
Mortgages as pensions
Pension mortgages are a niche market…
…but investing in homes for retirement is likely to be a significant market
Figure 5: Lending for second homes and holiday homes, RoI, 2003-07
Brokers and intermediaries…
…make the market more price sensitive
Buying abroad
BROADER MARKET ENVIRONMENT
Key Points
Interest rates prompt remortgaging and switching
Figure 6: UK and eurozone interest rates, 2001-07
Mortgage repayments to increase…
…prompting a switch to fixed rate mortgages
50% of market unaware of interest rates
NI economy particularly susceptible to rate rises
Where will it stop?
Property reaching the limits of affordability
Figure 7: Average property prices, RoI and NI, 2000-06
Repossessions increasing
Prompting lenders to be more flexible
Political stability in NI should promote investment and property buying
House prices growth slowing in RoI
A growing immigrant mortgage market
Average household getting smaller
Figure 8: Number of households, by size, NI and RoI, 2001-06
COMPETITIVE CONTEXT
Key Points
Rented properties account for a quarter of households
Figure 9: Home ownership status among adults in NI and RoI, 2006
Renting to grow, mortgages to slow
Figure 10: Home ownership status among adults in NI and RoI, 2001-06
WHO’S INNOVATING?
Key points
Bidding for business
Mortgages for cash-poor consumers
Automated valuation models (AVM)
MARKET VALUE AND FORECAST
Key points
Overall mortgage debt has tripled since 2001
Figure 11: Value of outstanding mortgages, RoI and NI, 2001-06
Average size of loan almost doubled in RoI
Figure 12: Number and value of mortgage loans approved, RoI, 2001-12
Number of homebuyers has reached its peak in RoI
Mintel forecast explanation
NI mortgage market needs more FTBs
Figure 13: Number and value of mortgage loans approved, NI, 2001-12
Fewer FTBs slows housing market
Will the housing market cool off?
Low return on buy-to-let investments
Not all doom and gloom in NI
Slow growth, but ‘growth’ nonetheless
Still growth for mortgages as consumers move to remortgaging and top-ups
Fixed rates will continue to gain popularity
More switching likely
Variable rates will still be used
Brokers to grow in RoI
MARKET SEGMENTATION
Key Points
FTBs vs existing homeowners
Figure 14: Number of mortgage loans approved, by buyer type, NI, 2001-06
Rising prices – decreasing FTBs
Value still increases
Figure 15: Number of mortgage loans approved, by buyer type, RoI, 2001-06
Existing homeowners
RoI buy-to-let market
Figure 16: Number and value of buy-to-let loans approved, RoI, 2005 and 2006
BTL market to slow, despite overall optimism
NI market may grow in line with UK predictions
RoI top-up mortgages
Figure 17: Number and value of top-up loans approved, RoI, 2005 and 2006
COMPANIES AND PRODUCTS
Key Points
 BANKS AND BUILDING SOCIETIES
Abbey
Allied Irish Bank/First Trust
Bank of Ireland
EBS Building Society
First Active
Halifax (Bank of Scotland)
The Mortgage Store
IIB Homeloans Ltd
Irish Nationwide
Permanent TSB
National Irish Bank
Northern Bank
Nationwide
Progressive Building Society
Ulster Bank
 SUB-PRIME MORTGAGES
 BROKERS
CHANNELS TO MARKET
Key Points
 MOST MORTGAGES ARRANGED DIRECTLY WITH THE LENDER
Figure 18: How the mortgage was arranged, NI and RoI, 2002-06
Brokers – good or bad?
Arranging mortgages online
No online brokers likely
CONSUMER: OWNERSHIP OF MORTGAGES
Key Points
1.57 million mortgage holders in Ireland
Figure 19: Ownership of mortgages, NI and RoI, 2002-06
Property prices more prohibitive for the RoI buyer
Marital and parental lifestages still coincide with homeownership
Helping the bank of mum and dad
Repayment mortgages dominate the market
Figure 20: Type of mortgage owned, NI and RoI, 2002-06
More pension mortgages than meets the eye?
Most homeowners on variable rates
Figure 21: Type of repayment mortgage, NI and RoI, 2002-06
Variable rate mortgage loses popularity…
…reflecting a change in mortgage arrangement behaviour
Encourages switching behaviour
CONSUMER: REMORTGAGING AND SWITCHING
Key Points
More homeowners increase the value of their mortgage
Figure 22: Mortgage owners who have increased the value of their mortgage, NI and RoI, 2002-06
Home improvement is the main reason for remortgaging
Figure 23: Mortgage owners who have increased the value of their mortgage, by reason for remortgaging, NI and RoI, 2003-06
More mortgage owners switch provider
Figure 24: Mortgage owners who have changed providers in the last 12 months, NI and RoI, 2002-06
Apathy towards switching
CONSUMER: SAVING UP AND PAYING OFF
Key Points
Saving a deposit in a buy now pay later culture
Figure 25: What people are saving for, NI and RoI, 2006
Mortgage overpayments
Figure 26: Spending priorities, NI and RoI, 2006
Pay off loans before making additional payments
APPENDIX
Regional definitions
Population 2006
BMRB Target Group Index (TGI) sample sizes
Sample sizes for Millward Brown data
Economy
Figure 27: Health of the economy, NI and RoI, 2002-07
Figure 28: House price to income ratio, NI and RoI, 2000-05
More buyers hit with stamp duty
Figure 29: Stamp duty thresholds and levies, UK and NI, 2007
Figure 30: Stamp duty thresholds and levies, RoI 2007
Notes on first time buyers
Adults who have used the Internet
Figure 31: Adult population who have used the Internet in the last 12 months, by demographic sub-groups, NI and RoI, 2006
Population statistics
Figure 32: Population change by age group, NI, 2000-20
Figure 33: Population change by age group, RoI, 2000-20
Figure 34: Forecast population change, by age, NI, 2000-20
Figure 35: Forecast population change, by age, RoI, 2000-20
Long-term responsibilities start later
Figure 36: Average age at marriage, men and women, NI and RoI, 2000-05
Figure 37: Average age of women at birth of first child, NI and RoI, 1991-2005
Many potential FTBs worried about finding a foothold
Figure 38: Current worries of adults under 35, NI and RoI, 2006
Employment statistics
Figure 39: Percentage in employment, by age group, NI and RoI, 2000-05
Additional consumer data tables
Figure 40: Ownership of mortgages, NI and RoI, 2004 and 2006
Figure 41: Owners who have increased the value of their mortgage, NI and RoI, 2006
Type of ownership
Figure 42: How the mortgage is owned, NI and RoI, 2006
Figure 43: Top ten things people are saving for, by age, NI and RoI, 2006