Mortgage lending by banks fell again, while the growth in home prices has also fallen back, official figures published yesterday showed.
Central Bank lending figures showed that net mortgage loans fell 2% in June from a year earlier, even though home loans in the month had increased by €105m — the fastest pace since the depth of the crisis, in February 2010.
Households, however, continued to pay back more home loans than they borrowed, and corporate lending fell by an annual 5.7%. CSO figures showed that the pace of growth in home prices has eased again.
Prices fell by 0.1% in June from May and were up 6.6% from June 2015. That marks a slower rate of annual growth from the 6.9% and 7.1% increases posted in May and April, the figures show.
There has also been a marked slowdown from the 10.7% annual rise recorded in June last year.
Central Bank mortgage lending controls were introduced at the start of last year.
They limit the amount that homebuyers can borrow based on a ratio of the loan-to-value of the property and the loan-to-income ratio of the borrower.
Dermot O’Leary, chief economist at Goodbody Stockbrokers, said that “price stagnation has been the major theme” for house prices this year.
“We remain of the view that this will be a year of two halves as the hangover associated with the Central Bank mortgage rules wears off and supply shortages come to the fore, but the rules appear to have put a cap on excessive price growth in Ireland,” Mr O’Leary said.
Property industry participants have called for the loosening of the rules as the Central Bank conducts a review of their effects this year.
Most analysts, and the IMF as recently as this week, strongly support the restrictions for helping stop any return to the damaging boom in house prices at a time of national shortage.
Davy Stockbrokers said the spillover effects on confidence here from the Brexit vote could bring “a potential headwind” for house prices.
The broker nonetheless forecasts prices will rise 5% this year. Alan McQuaid, chief economist at Merrion Capital, said the figures showing reduced lending across the economy “remain a cause for concern”.
“Households and businesses may still want to pay down outstanding debt which is fine.
“However, with the cost of funding remaining high, particularly compared with the eurozone average, there is no real incentive to take on new borrowings, which is a concern going forward.
“The bottom line is that credit will in our view need to flow at a much stronger level than currently if the Irish economy is to grow to potential over the long-run,” he said.
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