Central Bank figures show €19m fall in home loans

By Brian O’Mahony

Tuesday, February 02, 2010

THE appetite for credit continues to fall as the amount of private sector credit (PSC) declined annually by 6% in 2009.

In the month of December new Central Bank figures show mortgage debt was down by€19 million as borrowers paid more off existing loans than they borrowed, new credit figures from the Central Bank show.

PSC fell by €1.2 billion, or 0.3%, in December as banks wrote down bad loans and increased provisions for bad debts while exchange rate effects were also a factor in the weaker figures.

This follows decreases of €2.3bn and €2.5bn in October and November respectively, which reflected increased write-downs and bad debt provisions.

However, repayments on credit card debts were less than new spending inDecember, contrary to the experience earlier in the year as credit card use continued to expand.

Total mortgages outstanding at the end of last year stood at just under €148bn, the figures show.

The Professional Insurance Brokers Association (PIBA) said yesterday’s figures demonstrate that lending is being strictly limited in the current tough climate.

It said the figures were further evidence of "adysfunctional banking system".

Its director of mortgage services, Rachel Doyle, called for a return to "normal prudent lending practices".

"This is the eight consecutive month lending has declined and she accused banks of "cherry picking in an extreme fashion".

"Bank lending is, in reality, now only available to certain people within the community, generally those with very secure incomes", she said.

While prudence was needed "the people who are losing out most, as a result, are first-time buyers and largely private sector workers".

"This is happening at a time when there is evidence of renewed demand and much greater affordability. First-time buyers are having great difficulty in getting loans," Ms Doyle said.

She said a survey ofPIBA members found that almost three-quarters of mortgage applications are now being declined.

December’s money supply figures for the eurozone as a whole suggest credit conditions remain very tight, despite the ECB’s unlimited provision of liquidity to banks, said Alan McQuaid, chief economist at Bloxham Stockbrokers.

Though the ECB is unlikely to raise official interest rates until late 2010, McQuaid warned the move by Irish banks to raise mortgage rates "is likely to impact negatively on overall Irish private- sector credit and residential mortgage lending for the immediate future".

This story appeared in the printed version of the Irish Examiner Tuesday, February 02, 2010