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Housing Finance Market Overview
In Ireland, housing finance is mainly raised from banks and Building Societies. Mortgage Brokers have an important intermediation role as about 40 per cent of all mortgage transactions were processed through mortgage brokers in 2005. The housing finance market has seen a massive boom in Ireland since the year 2000. The average annual growth rate of the ratio of mortgage debt to GDP was about 14 per cent till 2007. The mortgage debt to GDP ratio increased from 31.1 per cent in 2000 to 75.3 per cent in 2007.
The Market from the Perspective of the Demand Side
Before the financial crisis loan-to-value ratios of 100% were widespread, but access to mortgage finance has been tightened with loan-to-value ratios falling to 90%. The most home loans taken out are variable rate loans though fixed interest loans are not uncommon. Mortgage interest can be deducted from taxable income. The mortgage interest tax relief lies between 15 and 25 per cent and is granted for the first 7 years.
House Price Development
Housing prices have risen fast since the year 2000 with an average annual growth rate of more than 11 per cent till the peak in the beginning of 2007. Since then, house prices have fallen almost 20 per cent till the beginning of 2009.
Deposits are for the banks the main source of funding for their mortgage market activities. In 2007, securitised mortgages and Asset Covered Securities (Covered Bonds) had each a share of about 10 per cent on the total residential mortgage debt outstanding.