Mortgage growth rises by lowest level in 12 years

RESIDENTIAL mortgage growth rose by its lowest level in 12 years in November according to figures released by the Central Bank.

It said mortgage lending grew by just €96m in the month, compared with an average monthly increase of almost €2 billion at the height of the housing boom in 2006.

It also compares with an average monthly increase of more than €850m between January and September of this year.

The annual rate of increase in residential mortgages slowed to 6.7% last month from 7.6% in October — the lowest annual rate of increase since 1986.

New credit card spending fell 10% to slightly over €1 billion, its lowest since April 2006.

The annual growth rate for overall lending eased to 8.4% in November from 8.9% in October and 17.1% in November last year, according to the figures.

It was also well below a 30.3% peak hit in June 2006 when the Central Bank warned that the booming property market was fuelling unsustainably high lending growth.

Private sector credit rose by €539 million in November or 0.13%, bringing the total outstanding level to €401.8 billion.

Jason Somerville of Bloxham Stockbrokers said: “The slowdown in credit growth is symptomatic of a consumer sector that has become increasingly more cautious in recent months as the global credit crunch and the deteriorating Irish economic outlook have significantly increased fears about domestic employment prospects going forward.

“Against this background it is likely consumers will remain very cautious in 2009, saving rather than spending or borrowing. As such, we believe that both overall private-sector credit growth and mortgage lending growth will continue to fall in the coming months.”

The Central Bank said aspects of the private sector credit (PSC) data in November have been affected by a number of securitisations of residential mortgages.

“These securitisations have led to a fall in the outstanding level of mortgages on credit institutions’ books but this has been offset in overall PSC by a corresponding increase in holdings of securities by credit institutions, resulting from their purchase of the mortgage-backed securities,” it said.

Credit institutions in Ireland accounted for €210.1 billion of the eurozone’s broad money supply (M3) in November, a monthly increase of €1.1 billion or 0.5%.

That meant there was an annual rate of decline in M3 money supply of 8.6% in November after a 9% drop in October.

Mr Somerville also said most of the increase in outstanding private-sector credit took the form of non-euro lending to ‘Other Financial Institutions’, which are not generally associated with activity in the domestic economy.

“In this regard, lending to non-bank IFSC companies decreased by €1.5bn over the month, following a rise of €1.6bn last month, while non-euro lending decreased by €2.1bn.

“The annual rate of increase in private-sector credit has been falling since April and reached 8.4% in November, down from 8.9% in October and 17.1% in November 2007. It is now below the euroland average, having been running three times higher back in 2006.”