CML Northern Ireland: An overview in 2006
Last reviewed 16/09/2008: any recent updates in this colour.
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This page provides an overview of the CML's policy position in Northern Ireland, and outlines the work of the CML Northern Ireland Committee. Greater stability has given a boost to the Northern Ireland economy and housing market in recent years. Whilst rising house prices may be a positive economic development generally, affordability has consequently become the major issue, exercising both lenders and the government to find solutions.
For more information on the Northern Ireland housing and mortgage market, the CML has published several documents, all of which can be found at the bottom of the page:
- an overview and analysis essay of the Northern Ireland mortgage and housing market, which includes updated statistics and summarised policy issues;
- a Northern Ireland fact sheet which is updated annually and available free to all;
- a range of other essays on relevant topics such as affordability and first-time buyers, all of which include data for Northern Ireland; and
- statistics on the Northern Ireland mortgage and housing market. These are also summarised in the Northern Ireland factsheet.
Recent articles on Northern Ireland are attached. Further articles can be found in the research section.
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A well performing economy in Northern Ireland as well as the rest of the UK and notably the Republic of Ireland in recent years has had a positive impact on the housing market in the province. Although the province missed out on the UK housing boom of the late 1980s, it then caught up with UK growth since 2000 and growth there is now almost comparable.
The tenure share has also changed in the last decade. In 1995 according to statistics from the Northern Ireland's devolved Department for Social Development (DSD), owner-occupiers accounted for 65% of housing. This has risen to nearly 72% by 2005, the highest owner occupancy rate in the UK. The private rented sector has seen the biggest increase: from 3.4% in 1995 to nearly 10% in 2005. Housing Executive property which held nearly a quarter of all housing stock in 1995, now only constitutes 14% of it.
This change in tenure share results in more choice and flexibility in the housing market to cope with demographic and social changes facing Northern Ireland. The decade has seen a rise in immigration, resulting in a need for shorter-term but quality accommodation that is met by a growing private rented sector. Social change has resulted in a rise in single person households: from about 5% of UK stock in 1991 to about 8% in 2006. This share is expected to match the proportion of married person households by at least the year 2021.
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According to the Regulated Mortgage Survey, 25,900 loans were made for residential house purchase in the province in 2005. Although relatively small at 2.6% of the UK market, it is proportionate to its national population share which is about 2.8%. The number of loans increased nearly 50% between 1993 and 2004. The total value of loans made for house purchase was £2.3 billion, with an average advance of £83,400.
There are 45 lenders active in the Northern Ireland mortgage market, compared with 152 in England and Wales. This small number may be partly due to the smaller size of the market in Northern Ireland, but differing conveyancing processes and lack of familiarity with them may also explain the absence of some lenders.
More lenders are likely to enter the market in the future, both from the UK and the Republic of Ireland, as rising household numbers cause the mortgage market to grow. Technological advances and the availability of internet applications should further lower entry barriers and aid entry. Any efforts by Brussels to facilitate the creation of a european internal mortgage market may certainly influence the situation here, and the CML is very active in discussions with the European Commission on this subject.
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Although home-ownership is increasing, the debate over affordability remains very live especially for first-time buyers. The CML has published a substantial amount of research on this subject, commenting on the UK generally and the context of Northern Ireland specifically (see below).
At the end of 2005, the typical first-time buyer household in Northern Ireland was spending 14.6% of their gross income on mortgage interest payments, compared to 16.4% in the UK. This is the highest percentage since 1991 when first-time buyers there were spending 15.2% of their income.
Lenders are working to help consumers afford their mortgages whilst maintaining the standards of responsible lending and sustainable home-ownership.
- Analysis of individual cases: historically lenders have used loan-to-value (LTV) and income multiple caps, but now an increasing number are looking at cases on a more individual basis, and are assessing how much they are prepared to lend based on the applicant's other commitments rather than just income.
- Parental guarantees and joint mortgages: many lenders allow parents to guarantee their children's mortgages subject to their own financial position. Yet another are joint mortgages to allow first-time buyers to club together; finally:
- General product features: the UK enjoys one of the most extensive mortgage product ranges in Europe, including offset mortgages, 100% mortgages and higher LTV. The rise of fixed-rate lending makes it easier, in an environment where some borrowers may need to borrow more in relation to their income, to ensure that this will remain affordable for them even if rates change. The trend away from explicit "high lending fee" charging for mortgage indemnity insurance has also helped first-time buyers who have few resources for additional up-front costs.
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The CML has also been working with the government both in the UK generally and specifically in Northern Ireland on low cost home ownership (LCHO) initiatives. Two LCHO initiatives are available to borrowers in Northern Ireland: the house sales scheme and Co-ownership.
Co-ownership allows a consumer to take 50%, 62.5% or 75% initial equity share in the home of their choice, depending on their budget. In March 2006, the government announced that co-ownership rents would be cut by 21%, and the applicant fee from £410 to £250, thus reducing the up-front costs for consumers. The DSD will be reviewing the price limits that apply to property eligible for purchase through Co-ownership to make them reflective of rising house prices.
In England and Wales, the Open Market HomeBuy scheme involving equity loans is being launched this year, which will help upwards of 100,000 people into the housing market in a sustainable way by 2010. In Scotland the HomeStake scheme is being piloted in Edinburgh and the Lothians. To assist in the development of this, the CML has been participating in the new shared equity task force announced by the government in the 2006 Budget. This will look at government intervention, particularly scope for the partnership with the private sector. Research by the CML suggests that 25,000 households in England who are currently unable to afford home-ownership would be able to under proposed shared equity products.
The CML has been working with the DSD and Northern Ireland Housing Executive (NIHE: Northern Ireland's strategic housing authority) on affordability and LCHO schemes as well as housing research activity for the province. The NIHE also publishes other useful research on the Northern Ireland housing market, including its housing research bulletin.
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Northern Ireland will be observing very closely the home buying and selling reforms that are taking place elsewhere in the UK. The next few years will see the implementation of and development of home information packs (HIPs) and home condition report in England and Wales, and purchaser's information packs (PIPs) and the single survey in Scotland.
These reforms are partly driven by the European Energy Efficiency Directive, which Northern Ireland is implementing separately. In late 2004 the DSD published a consultation document on the Energy Performance Certificate for Residential Buildings Regulations 2006, which explored a range of issues. Whether Northern Ireland decides to adopt measures comparable to the rest of the UK will be a debate for all stakeholders over the coming years.
