Homebuyers in a hurry should check out Ulster Bank or KBC Bank. They are turning around mortgage applications in about eight days, according to industry insiders, compared with waiting times of up to two months at other lenders.
The speedier response times are probably because the two banks are not so busy. They remain open for business but customers are understandably wary of committing to long-term products such as mortgages from lenders that will not be around for much longer.
Customers’ hesitancy could mean they are missing a trick, according to Garry Manning of Omac Mortgages & Finance, a broker.
As well as a quick decision, Ulster Bank has a market-leading rate of 2.2 per cent fixed for up to five years, the best deal available from any mainstream lender.
Househunters have until the end of October to apply, after which time Ulster Bank will shut its doors for good to new customers.
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It will be long gone from Ireland by the time the five-year fixed term expires, leaving borrowers at the mercy of Permanent TSB (PTSB), which is buying Ulster Bank’s loan book. Yet borrowers would face the same uncertainty if Ulster Bank stayed put, according to Manning, because no lender makes promises about what customers might expect after a fixed-rate deal runs out.
Homebuyers are not taking any chances, however, and Ulster Bank attributed a decline in total income in the first half of this year in part to its impending closure.
The extent to which this is playing into the hands of the remaining lenders should become clearer this week when AIB and Bank of Ireland release their half-year results.
The chances are that, just like PTSB, which reported last week, they are gaining a bigger share of the mortgage market at the expense of the two departing banks.
These gains are important because organic growth could remain elusive. Mortgage lending has recovered to pre-pandemic levels but it will remain constrained by the relatively slow pace of house construction.
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The three mainstream mortgage providers that will remain after the exits of Ulster Bank and KBC are awash with money to lend, with PTSB’s loan book amounting to just 77 per cent of customers’ deposits. This should overcome their instincts to charge customers more when competition evaporates as five lenders are reduced to three.
Eamonn Crowley, PTSB’s chief executive, expects lending for the market as a whole will come in at about €10 billion this year, slightly ahead of 2019 before the pandemic struck. This is forecast to nudge towards €11 billion next year and €12.5 billion in 2023. Yet these estimates mask an important underlying trend. While the value of lending is set to increase, the number of borrowers is not.
The market is growing only because fewer buyers are borrowing more, with new mortgages averaging €246,000 in the second quarter of this year, up from €231,000 in the same period in 2020.
“The mortgage market is on track to reach €10 billion this year but with a different mix due to lower volumes and higher loan sizes,” Dermot O’Leary, chief economist at Goodbody Stockbrokers, said.
Even more worrying for banks is that up to 60 per cent of new housing that came on stream over the past year was bought without a mortgage, acquired instead by institutional landlords or for social housing.
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This trend is accelerating, with the Central Statistics Office reporting that more than half of completions in Dublin in the past year were apartments, whose high construction costs generally put them beyond the reach of individual mortgage-backed homebuyers.
“The mortgage market can grow even if its share of house construction does not,” said O’Leary, assuming that construction continues to grow. This is because any new supply causes a ripple effect throughout the rest of the housing market, creating liquidity and therefore mortgage opportunities in the second-hand housing market as existing homeowners take the opportunity to trade up or down.
Two thirds of the mortgage growth that he is forecasting, for example, will come from lending on existing rather than new properties. This should keep the banks’ numbers on an upward trajectory but, without a significant increase in construction, they cannot realise their full potential.
