MORTGAGE lending grew at an annual rate of 11.6% in March, the lowest in 16 years.
The continuing decline in the demand for home loans reflects a seriously weakening economic outlook, rising borrowing costs and concerns over jobs.
The figures support claims yesterday by the EBS Building Society that the amount of new mortgages written this year could fall 25% as economic uncertainty and rising interest rates force people out of the market.
Banks and other lenders have tightened lending criteria as lenders pull back from generous lending terms, including 100% mortgages.
The first three months of 2008 was also the weakest start to a year for mortgage lending for five years, said the bank.
However the rest of the economy appears not to have slowed as much as housing as the statistics show total borrowing rose at an annual rate of 17.1% in March, compared with 15.6% in February. That surge ended an eight-month run of falls but the Central Bank said lending remains subdued.
The decline in the annual rate of increase in outstanding credit card debt since September 2007 ended in March, when the rate rose to 8.6% from 8.2% in February.
But the level of increase in credit card debt rose by just €10.4 million over the period.
In the case of future lending for mortgages, one banking source said the biggest threat to the housing market is the credit crunch.
While there is enough money in the banking system, the cost of accessing remains high and lending periods have been sharply restricted.
If it persists, the demand for housing could be seriously undermined, he said.
Overall the Bank’s figures confirm a market that is starting to slow dramatically.
In practical terms the slowdown is starting to manifest itself with the banks slashing commissions to brokers in half in recent weeks, which will add about €1,500 to the cost of borrowing €300,000 to buy a new home.
That shift, and the slowdown in demand for loans, will cost brokers about €80m in lost earnings in 2008, according to a recent report.
The slowdown comes at a time when mortgage affordability is rising due to an increase in average earnings and falling house prices.
However the cost of borrowing is rising and it now looks unlikely the ECB will cut rates this year as had previously been expected.
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