Central Bank rules capping mortgage lending at 80 per cent of the value of a home, and 90 per cent in the case of first-time buyers, are making it harder for people to buy homes and “causing wider issues” in the property market.

Figures from the Banking and Payments Federation of Ireland show a decline in mortgage approvals and drawdowns for the first time in two years. In the past three months, an average of 2,709 mortgages were approved each month, of which 89 per cent were for house purchase. While the number of mortgages approved rose by 5.2 per cent year-on-year, it fell by 2.1 per cent month-on-month.

The value of mortgage approvals increased by 6.4 per cent year-on-year but fell 3.1 per cent month-on-month.

Moving average

The average value of mortgages approved per month in the three months to the end of August was €499 million, of which €460 million, or 92 per cent, was for house purchase.

The figures are based on the three-month moving average. Year-on-year compares the average for the three months ending August 2015 with the three months ending August 2014. Month-on-month compares the average for the three months ending August 2015 with the three months ending July 2015. In August, the average value of a mortgage fell to €184,000, down 3 per cent year-on-year.

Remortgaging continued to grow, reaching the highest volume and value since the federation started to compile the series at the start of 2011. The average “nonpurchase mortgage” was up 33.8 per cent year-on-year to €125,806.

Rules

“With house prices up nationally over the past year, the Central Bank rules are clearly restricting the amount of credit available,” Goodbody chief economist Dermot O’Leary said in response to the figures.

“This is exactly what macroprudential rules are supposed to do, but there is little doubt the rules are also causing wider issues in the housing market in the short-term.”

Earlier this week, figures from daft.ie showed a further softening of the property market in Dublin. Its data showed the average asking price in Dublin fell by 1.4 per cent in the past three months, the second recorded price decline in more than three years.

It means year-on-year, inflation in Dublin has slowed dramatically with declines recorded in some of the more prosperous south Dublin suburbs.