Last week the ESRI said it expected house prices to fall by 50% from peak to trough by the end of this year.
It warned of further possible declines in the year ahead as falling incomes and consumer nervousness threaten to depress demand even further.
These latest Central Bank figures reflect weakening demand as lending for consumption etc fell 14.8%, marginally lower than the August numbers.
Household lending in September fell by 4.5% from the same month last year, and was slightly worse that the August outturn.
As businesses continued to struggle the statistics showed loans to the sector fell 3% compared with September last year, and that followed a 2.2% annual drop in August.
The Central Bank noted a substantial dip in short-term business loans, including overdrafts, in September, while loans of between one and five years showed some increase.
The net flow of household lending during September was minus €279m, maintaining the downward trend of 2010 that has seen a fall in household loans in every month so far this year.
Loans to households in the three months ending September 2010 consisted of an average net flow of -€144m in loans for house purchase, -€270m in consumer loans and -€6m for other purposes.
PIBA, the largest group of independent mortgage and insurance brokers, said the decline in mortgage lending “continues a disappointing trend.”
Rachel Doyle, director of PIBA Mortgage Services, said: “We know there is a demand in the market from first-time buyers in particular.” But both first timers to the market and the self-employed experienced the “greatest difficulty in securing loans at a time when affordability is at an all time low,” she said.
She accused the banks of imposing very unrealistic criteria “as a form of refusal.”