26 Apr 2019

Irish banks – Mortgage demand jumps in Q119

Mortgage approvals and drawdowns data (BPFI) jumped in Q119 after a sluggish finish to last year and a mixed start to the 2019 data.

 

 

Total drawdowns for Q119 increased by +10.6% y/y vs Q118 to €1.884bn, though they were -28.5% q/q vs Q418 due to seasonal factors. Total volume of mortgage drawdowns (by number of borrowers) increased +8.9% y/y to 8,577 in Q1, while average mortgage values increased by +1.6% y/y to €220k. The one area of weakness within the drawdown data was in the mover-purchase (generally trading up) segment, which was only +3.2% y/y vs Q118 and -30.2% vs Q418, fitting with our previous commentary around difficulties in this segment centred around the prime Dublin market and the impact of Central Bank of Ireland mortgage lending rules (particularly around higher value purchases).

 

Approvals data also showed some improvement in March after a weak first two months of the year, with €921m in new approvals on the month, this +21% y/y vs March 2018 and +22% m/m vs February 2019. However it is notable again that the laggard within the total approvals came from mover-purchasers, which was only +14% y/y in March and +14% m/m vs February. The average value of approved mortgage applications was €222k, -1.7% y/y vs March 2018 and -1.3% m/m vs February 2019. Total approvals for Q119 were €2.350bn, +9.7% y/y vs Q118 and -5.3% q/q vs Q418, with seasonality again a factor.

For 2019 as a whole, we continue to expect €10.05bn in new mortgage drawdowns (+15% vs 2018 €8.721bn) and between €11.0-11.5bn in new approvals (+c.11% vs 2018 €10.126bn). 

Dalata – Visitor numbers to Ireland +5.5% in Q1 

Trips to Ireland by overseas residents grew by 3.3% y/y in March, with aggregate growth of 5.5% y/y in Q1.

The North American market continues to expand strongly with the number of visitors from the US and Canada +10.7% y/y in the first quarter. This growth follows a 13.4% increase in 2018, a year which saw this segment account for 22% of all visitors to Ireland. Trips to Ireland by residents of Britain were +1.4% y/y in Q1 while trips by residents of other European countries were +7.6% y/y in the same period.

The latest data show a continuation of recent trends whereby good growth in tourism volumes is being driven by the North American market and, to a lesser extent, the European (ex. Britain) market. This dynamic is positive for the hospitality industry in Ireland given that North American residents have a much higher propensity to stay in hotels while in the country, while they also spend more on average per visit – see our “Top of the Charts” note, published last week, for further detail. 

Global CB’s turn dovish 

The old adage that the US Federal Reserve leads and the rest follow seems to be ringing true yet again. Following on from their (Fed) sharp monetary policy ‘volte face’ at the outset of the year, it hasn’t taken too long for a cohort of other Central Banks to follow suit.

In the face of less than impressive inflation data and slowing global growth, the ECB were probably the first big Central Bank to move into to the Fed’s slipstream with the introduction of their new TLTRO programme a few weeks back. This fresh turn down the dovish avenue gathered pace on this short week with the Bank of Japan, Bank of Canada and Sweden’s Riksbank all moving to a renewed easing bias. Pointing the finger of blame in a similar direction as the ECB, all three major Central Banks have pulled any tightening bias firmly off the table, for the short term at least. 

Brexit update 

The pound continues to tread water, however the outlook for a Brexit deal in the near term is looking less and less hopeful.

Reports suggest that Theresa May is losing hope that she can avoid having to hold EU elections on 23 May. Bloomberg reports that a 4th vote on her Brexit bill is unlikely to happen next week. A vote any later, even if successful, would leave insufficient time to get the deal ratified. If May is forced to hold an election, pressure will mount from Brexiteers, and focus will turn to the 30th June, May’s own self-imposed target for agreeing a deal to remove the UK from the EU (to avoid having to take seats in the EU parliament).

David Liddington, May’s de facto deputy reiterated that the government do not want to have UK MEP’s take their seats in the next session of the European parliament, which begins on 2 July. Foreign secretary Jeremy Hunt also piled pressure on May overnight, stating that “we have to leave, we have to leave quickly, we have to leave cleanly”. The former “Remainer” also vowed to take the UK out of the Eurozone with no deal if the alternative was for no Brexit to occur. 

Brent sets a new high for 2019 

Brent has set a new high just over 75 $/b yesterday, brushing off an increase of over 5m barrels in US crude inventories. Speculative buying has also increased, but will it continue? Much of the increase in oil prices this year has been propelled by strength in equities as the US and China made progress on trade talks and, more recently, on a positive US earnings season.

The recent news that waivers from US sanctions on Iran will not be extended, has put the focus back on fundamentals which had been looking positive anyway. Saudi Arabia responded to the news by saying that it saw no reason to change the agreed cuts and while it is itself over complying and so could increase production without breeching its limits.

Perhaps the Saudis are keen to avoid a repeat of the overreaction to high prices last year, that led to the market being oversupplied in the Autumn? However, this may give free reign to speculators in the lead up to OPEC meeting in June - the next opportunity to vary the agreed limits. Such a trend could also be buoyed by the usual over dramatisation of seasonal drawdowns in crude ahead of the summer.  

Economic Releases 

11.00    UK       CBI Trends Total orders

13.30    US       GDP Annualized

13.30    US       Personal Consumption

15.00    US       University Of Michigan Sentiment