THE ANNUAL growth rate in new mortgages fell to 9 per cent last month and is now at its lowest level since the middle of 1987, according to new statistics released yesterday.
Monthly statistics from the Central Bank of Ireland and the Financial Services Authority of Ireland show residential mortgage lending grew by €508 million in August - just more than half the growth amount for July. Although August is traditionally a slow month for mortgage borrowing and residential sales, that month's increase was just one-quarter of that recorded in August 2006.
In a briefing note, the Central Bank said that while house prices have been falling for 18 months, more affordable houses have not yet boosted residential mortgage borrowing. It also noted banks were reporting tighter standards on loans to households due to a rise in the cost of funds to banks, but also because of an increased perception of risk - primarily due to the poor economic outlook.
Overall private sector credit increased €3.6 billion last month, bringing the total increase for the year to €23.1 billion. This is one-third lower than the annual increase one year ago and the annual rate of increase is 12.9 per cent, the lowest since July 2002.
The increase in private sector credit was mostly attributable to lending to non-financial corporate entities. Stripping out mortgages, the annual growth in credit was down 0.2 percentage points in August to 18.6 per cent.
The amount of debt on credit cards edged above €3 billion, but the rate of growth was unchanged from July at 10.2 per cent.
Alan McQuaid, economist with Bloxham stockbrokers, said in a note that "ongoing uncertainty about the global credit crunch and Irish economic prospects over the next 12 months are likely to continue to weigh negatively on residential mortgage lending and overall private-sector credit growth".
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