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Rising prices ease equity constraints for Northern Ireland borrowers


Published: 18 March 2014 | Author: Bernard Clarke

First-time buyers are leading a recovery in lending in Northern Ireland, but the number of households in negative equity continues to constrain activity, particularly for those wishing to move or remortgage.

In the final quarter of last year, there were 1,800 loans to first-time buyers in Northern Ireland, worth £140 million – the highest three-month total since 2006, or before the onset of the financial crisis. Lending to first-time buyers was almost one-third (29%) higher than 12 months earlier.

However, lower incomes and property prices in Northern Ireland mean that first-time buyers take out smaller mortgages than elsewhere in the UK. A typical first-time buyer in Northern Ireland borrowed £70,200, or 2.85 times income, in the final quarter of last year, less than 60% of the UK average of £118,750 (equivalent to 3.36 times income).

Chart One: Lending to first-time buyers in Northern Ireland, number of loans advanced (left-hand scale) and proportion of UK total (right-hand scale)

Chart One Northern Ireland FTBs News & Views 5-18.03.14

Source: CML regulated mortgage survey

The number of loans to movers in Northern Ireland remains low by historical standards, although the 1,100 advanced in the fourth quarter of last year was 10% higher than 12 months earlier. Lending to movers in Northern Ireland accounted for only 38% of the house purchase market, considerably lower than the UK average of 55%. Remortgaging activity in the fourth quarter of last year was 8% higher year-on-year, with 1,300 loans advanced, although it also remains low by historical standards.

We are continuing to work on structural housing market issues, including the effects of negative equity, through the Department for Social Development’s newly-established housing supply forum. We are long-standing advocates of cross-industry engagement, and welcome the Assembly’s recognition that this kind of approach is needed to deliver the best outcomes.

Most of those affected by negative equity have taken out a mortgage since 2005. A lack of equity can restrict those looking to move or remortgage, and also present problems to the small number of households at risk of possession because of mortgage payment problems. 

However, signs that house prices are beginning to rise will ease the problem. The Royal Institution of Chartered Surveyors is expecting prices in Northern Ireland to increase by 4% this year. Earlier this month, finance minister Simon Hamilton said that he hoped "a rising, more buoyant and more confident property market will resolve many of the negative equity problems."

We are continuing to work on these issues, and to lobby policymakers to establish a favourable environment in which lenders can offer their own products and solutions to help households in negative equity, as well as others in the housing market.