Net mortgage lending increases for first time in seven years

Latest Central Bank figures reflect pick-up in housing market

Net mortgage lending in the Irish economy has increased for the first time in seven years, reflecting the current pick-up in activity in the housing market.

The Central Bank’s latest money and banking statistics show that net mortgage lending, effectively new drawdowns less repayments on existing loans, rose by €169 million or 0.2 per cent year on year in November. This was the first month of positive annualised growth recorded since 2010.

Since the financial crisis new mortgage lending has been eclipsed by the property owners paying down existing loans as overindebted households attempted to deleverage, resulting in negative growth.

The latest figures suggest this long period of retrenchment may finally have bottomed out.


"On an annual basis, repayments have outstripped new drawdowns since mid-2010. The scale of this negative new lending has been reducing steadily since the second half of 2013 as lending volumes picked up and has now turned positive," a Central Bank spokeswoman said.

The figures coincide with recent data from the Banking and Payments Federation, that point to a 25 per cent increase in mortgage approvals so far this year.

The Central Bank numbers suggested mortgage lending, which account for 83 per cent of banks’ total on-balance sheet loans, increased by €105 million in November.

The figures show that household deposits have also increased by €2.6 billion over 2017 and stood at just over €100 billion for the third consecutive month in November. The Central Bank said the increase over the year was driven by deposit flows into the overnight category, specifically demand deposit accounts.

On a monthly basis, deposits from households decreased in net terms by €548 million, reflecting a seasonal trend of declines in the month of November that has been seen in recent years.

Non-housing loans. meanwhile, increased by 1.8 per cent in annual terms in November, marking 13 consecutive months of annual growth while drawdowns on loans for consumption exceeded repayments by €484 million in the year to the end of November.

The latest Central Bank numbers came as fresh euro zone data showed bank loans to euro zone companies and households grew last month at their fastest pace in eight and a half years.

In a fresh sign that the bloc's economic expansion was gathering pace, corporate lending rose by 3.1 per cent in November while household credit increased by 2.8 per cent, in both cases the highest reading since mid-2009, the European Central Bank (ECB) data showed.

The ECB has kept its key policy rate unchanged at 0 per cent for more than a year, and more recently the deposit rate at -0.4 per cent, effectively penalising retail banks for keeping money on deposit with Frankfurt.

Speculation is now rife, however, that strong growth and falling unemployment across the euro zone will soon prompt the ECB to begin winding down its asset purchase programme – better known as quantitative easing (QE)- ahead of a period of interest rate hikes.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times