Ireland’s Mortgage Boom: A Canary in the Coal Mine for Housing Affordability?

A staggering €14.5 billion in home loans were issued in Ireland last year, the highest figure since 2008. But this surge isn’t simply a return to pre-crisis lending; it’s a complex story of first-time buyer demand, rising property values, and a chronic undersupply of housing – a combination that threatens to exacerbate affordability issues and reshape the Irish property landscape.

The First-Time Buyer Frenzy and the New Build Bias

While overall mortgage volume increased by 15.2% in 2025, the number of mortgages rose at only half that pace, indicating a significant increase in the average loan size. This is directly linked to the escalating cost of homes, particularly for first-time buyers (FTBs). Remarkably, 41% of FTB mortgages were for new builds – the highest proportion since 2009. This shift reflects a growing desperation among those entering the market, willing to pay a premium for available properties, even if those properties are newly constructed.

However, the picture is starkly different for second-hand homes. The number of properties available has plummeted, with just 11,551 homes for sale in early December – a dramatic drop from the 2015-2019 average of 26,000. This scarcity is driving up prices and pushing FTBs towards new developments, creating a self-reinforcing cycle.

The Supply-Demand Imbalance: A Looming Crisis

The root of the problem lies in the persistent undersupply of housing. Despite government targets of 50,000 new homes annually by 2030, only 33,000 were built last year. This shortfall isn’t merely a statistical inconvenience; it’s a fundamental constraint on the market, fueling price inflation and limiting opportunities for homeownership. Commencement activity, a key indicator of future supply, is also concerning, hitting its lowest level since 2016 with only 16,500 starts last year. Sustaining current building rates will require a substantial increase in the first half of 2026.

Mortgage Switching and the Impact of Interest Rates

The mortgage market isn’t solely driven by FTBs. A significant rebound in switching activity – up 57% in value to €1.7 billion – demonstrates that homeowners are actively seeking better deals. This was largely fueled by the European Central Bank’s (ECB) easing of interest rates following a period of increases. However, the future trajectory of interest rates remains uncertain, and any reversal could dampen switching activity and add further pressure on borrowers.

The Rise of Non-Bank Lenders: Revolut and the Future of Competition

The Irish mortgage market, traditionally dominated by AIB, Bank of Ireland, and PTSB, is poised for disruption. S&P Global anticipates increased competition with the arrival of Revolut, initially targeting a launch in late 2025. This entry of a fintech player could force traditional banks to innovate and offer more competitive products, potentially benefiting borrowers. However, it also raises questions about risk assessment and lending standards in a rapidly evolving market.

Looking Ahead: Projections and Potential Risks

Analysts predict continued growth in mortgage drawdowns, with estimates reaching €15.7 billion this year and €17.1 billion in 2027. The total value of mortgages is also on the rise, increasing by almost 5% last year to over €93.6 billion. However, this growth is not without risk. The increasing size of mortgages, coupled with a limited supply of affordable housing, could lead to a future correction in the market. Furthermore, the reliance on new builds could expose the market to vulnerabilities related to construction delays and quality control.

The Irish banks themselves are preparing for a changing landscape, focusing on diversifying their revenue streams through wealth management and insurance products. This strategic shift reflects an understanding that traditional lending margins may come under pressure in the face of increased competition and evolving consumer preferences.

Frequently Asked Questions About the Irish Mortgage Market

What is the biggest challenge facing the Irish housing market?

The most significant challenge is the chronic undersupply of housing, particularly second-hand properties. This scarcity drives up prices and makes it increasingly difficult for first-time buyers to enter the market.

How will Revolut’s entry impact the mortgage market?

Revolut’s entry is expected to intensify competition, potentially leading to more innovative products and competitive interest rates. However, it also raises questions about lending standards and risk assessment.

What is the outlook for house prices in Ireland?

House prices are currently rising, but the rate of growth may moderate if supply increases and interest rates remain stable. However, the persistent undersupply suggests that prices are likely to remain elevated in the near term.

The current mortgage boom is a symptom of deeper structural issues within the Irish housing market. While increased lending may provide short-term relief, a sustainable solution requires a significant increase in housing supply, coupled with policies that promote affordability and responsible lending. Without addressing these fundamental challenges, Ireland risks repeating the mistakes of the past and creating a future where homeownership remains out of reach for a growing segment of the population. What are your predictions for the future of the Irish housing market? Share your insights in the comments below!