Home mortgage lending in first ever fall

RESIDENTIAL mortgage lending fell last month for the first time on record.

The €100 million net fall in residential mortgage lending represented the first reverse since the Central Bank began compiling statistics in 1990 and shows how new lending failed to keep pace with repayments on existing mortgages.

The bank said the figures reflect low levels of activity in the housing market during the early part of the year. The total amount outstanding on residential mortgages at the end of the month was €148.2 billion, down from €148.3bn at the end of the previous month.

The figures still represent a rise on a year earlier of 3.4% but this was down 4.2% at the end of March, as the slowdown in housebuying works it way through the financial system.

Private-sector credit month-on-month fell by €1.5bn in April, compared with a revised fall of €3.5bn in March.

Year-on-year growth slowed to an annual rate of 2.4% from a revised 3.2% the previous month. Overall private sector credit has fallen by close to €2bn since the start of 2009.

Following the revision, the latest decline marked the lowest annual rate since January 1994, down from a peak of 30.3% in June 2006 when the central bank warned a booming property market was fuelling unsustainably high lending growth.

Bloxham chief economist Alan McQuaid said: “Mortgage demand is likely to have been dampened by general economic conditions, uncertainty with regard to future income and the expectation of further declines in house prices.”

The Irish Banking Federation (IBF) figures on new residential mortgages showed the value of new mortgages issued during the first three months of this year was 68% lower than in the same quarter last year.

“The ECB slashing rates to historically low levels has failed to halt the downward trend in private-sector credit. Furthermore, the unconventional stimulus measures announced by the ECB are not ambitious enough to reverse this trend and unlikely to have much impact on consumer borrowing in the short-term. The bottom line is that Irish year-on-year credit growth rates look set to fall further in the months ahead,” said Mr McQuaid.

A €500m drop for April in loans outstanding was the second consecutive monthly fall and brought the total outstanding down to €393.44bn, a year-on-year rise of just 2.4%.

Credit to non-financial corporates declined by nearly €900m in April, with a fall in outstanding loans accounting for almost all of the decline.

Repayments on credit cards exceeded new spending in April as outstanding indebtedness rose by €53m as a result of the posting of stamp duty to credit card accounts during the month.

The annual rate of increase in outstanding indebtedness on credit cards fell further to 0.8% in April, from 1.1% in March.