Buy-to-let makes up 25% of all property borrowing

BUY-TO-LET mortgages account for almost a quarter of all property borrowing by households in Ireland, with the bulk of such lending tied up in tracker products, according to figures published yesterday by the Central Bank.

Lending for investment properties on bank balance sheets amounted to €24.6 billion at the end of March last, with a further €74.3 billion lent to people to purchase family homes.

The figure excludes loans that have been securitised – or sold on to other investors – as these no longer appear on bank balance sheets.

Tracker loans account for 53 per cent of all property loans, and 63.7 per cent of buy-to-let loans.

Most of the rest is accounted for by other floating rate loans – defined as variable rate loans or those fixed for up to one year. Despite a move to fixed-rate loans over the past year, these account for just 16 per cent of principal property mortgages and 8 per cent of buy-to-let loans.

Property lending has been falling since the end of 2009, according to the Central Bank, falling 2.6 per cent in the 12 months to March last, when property lending on banks’ balance sheets amounted to €98.9 billion. A further €35.1 billion is accounted for by securitised mortgages.

Lending for purposes other than housing fell 5.8 per cent to €20.7 billion at the end of March. However, the rate of decline has slowed from 6.5 per cent at end-December and 15.6 per cent in the year to last September.

Overall, personal household lending was down 3.3 per cent in the year to the end of March to €119.6 billion.

Despite evidence of a rise in saving by Irish families, the amount of deposits fell by 1.9 per cent (or €1.7 billion) to €87.5 billion in the first three months of the year. Since March 2010, there has been a decline of €5.8 billion in the amount held on deposit in Irish institutions by personal customers, indicating a likely movement of Irish deposits out of the jurisdiction.

The Central Bank said it was producing the new report to more accurately account for personal lending. Existing monthly money and banking statistics include sole traders, partnerships and not-for-profit institutions in its “household” category.

Separately, yesterday, the Central Bank published new quarterly figures identifying lending to Irish private-sector enterprises.

The amount of lending to this sector outstanding at the end of March was €208.2 billion. However, the financial sector accounted for more than half of this (€108 billion) and property-related sectors almost a further €59 billion, leaving outstanding borrowings to other private-sector firms at €41.7 billion, down 3.8 per cent on the year. Businesses in the wholesale/retail and hotel and restaurant sector were the biggest borrowers within this group.

In the SME sector, outstanding credit last March was €58.2 billion, or €46.2 billion when the financial sector is excluded. This is down 1.8 per cent since the start of the year and 12.2 per cent down on the same period in 2010.

Gross new lending SMEs, (excluding restructuring and renegotiation of existing facilities) was €1.7 billion in the first quarter, compared to €1 billion in the last three months of 2010 and €552 million in the quarter before that.

Outside the financial and property sectors, agriculture and wholesale/retail accounted for most new drawdowns.