Household Credit Market Report for H1 2017 released

• Irish household debt continues to fall, but remains high
• Variable mortgage interest rates fall on a year-on-year basis
• In H2 2016, average First Time Buyers borrowed 79 per cent of the house value and an average of 2.9 times household income. Average Second and Subsequent Borrowers borrowed 66 per cent of the house value and 2.4 times household income.

The Central Bank of Ireland today publishes the latest Household Credit Market Report H1 2017. The report collates information from internal and external sources to give an up-to-date picture of developments in the household credit market in Ireland.

The report finds that Irish households continued to reduce their debt-to-income and debt-to-asset ratios during Q4 2016 but indebtedness remains high in a European context. It also finds that the pace of decline in overall mortgage credit continued to slow in March 2017, while growth in consumer credit remained positive.

In Q1 2017, the average standard (SVR) or LTV (Loan-to-Value) variable interest rate on Primary Dwelling House (PDH) mortgages in Ireland stood at 3.75 per cent on outstanding loans, a fall from 3.94 per cent in Q1 2016. The equivalent rate on new lending stood at 3.38 per cent in Q1 2017 compared to 3.63 per cent in Q1 2016.  Fixed mortgage rates on new and outstanding lending have also fallen over this period.  For First Time Buyers (FTBs), 52 per cent of new lending was agreed at fixed rates between July and December 2016, of which 39.6 per cent were fixed for over 1 year maturity. Variable rates were more common among Second and Subsequent Borrowers (SSBs) and Buy-to-Lets (BTLs), at 53 and 91 per cent of new lending respectively.

During the period from July to December 2016, the average loan-to-value ratio on new lending for FTBs was 79.0 per cent and the average loan-to-income ratio was 2.9. The corresponding figures for SSBs were 66.3 per cent and 2.4 respectively. These ratios were largely unchanged compared to the first half of 2016.

The overall value of mortgages in arrears continues on a downward trend, falling to €16.6bn in Q4 2016. This represents approximately 13.4 per cent of total mortgage balances. The arrears rate on non-mortgage loans is also on a declining trend.

The report also features a cross-country comparison of home purchases, down-payments and savings data.

Notes:

The report uses data drawn from Central Bank of Ireland Credit, Money and Banking, Retail Interest Rates, Quarterly Financial Accounts and Mortgage Arrears aggregate statistics, loan-level data collected by the Central Bank of Ireland from the Irish domestic banks, and the Banking and Payments Federation of Ireland.

The published Central Bank datasets are:

• Central Bank of Ireland – Private Household Credit
• Central Bank Quarterly Financial Accounts
• Central Bank Retail Interest Rate Statistics
• Central Bank Mortgage Arrears Data