Mortgage lending growth hits 16-year low
Thursday May 01 2008
THE growth of mortgage lending fell to its lowest level since 1992 in March, with economists predicting yesterday that home-loan lending would continue to weaken this year.
Figures from the Central Bank show that residential-mortgage lending grew at an annual rate of 11.6pc in March, the lowest since May 1992.
The first three months was the weakest start to a year for mortgage lending for five years.
There was a rise of €1bn in money advanced for home loans in March, the statistics show.
Economist with Bloxham Stockbrokers Alan McQuaid said it was likely residential-mortgage lending growth would continue to fall.
This was especially the case as consumer confidence had hit a record low in April and labour-market trends were deteriorating, and interest rates had gone up.
This meant consumers were likely to retrench further in the coming months.
Mr McQuaid said the trend in European Central Bank interest rates would be critical but there was unlikely to be a cut in rates.
"The bottom line is that the ECB is unlikely to cut official interest rates any time soon, and even if it were to move in the short term there is no guarantee any easing in rates would be passed on by the banks to consumers.
"Overall, we continue to look for residential-mortgage lending growth to ease further in the coming months, with the year-on-year rate of increase set to be back in single digits by year-end and much closer to the eurozone average."The Central Bank figures also showed that total credit rose for the first time in eight months.
Overall private-sector credit growth rose to an annual rate of 17.1pc last month from 15.6pc in February and was the first increase since July 2007.
Private-sector credit rose by €5.3bn or 1.4pc in March, bringing the total outstanding to €384.3bn.The Central Bank said month-on-month increases in loans have been subdued since the start of this year. Loans are the biggest element of private-sector credit.
But in March there was an "exceptionally large increase" in the holdings of securities, which form another component of private-sector credit. This suggests moves by banks to boost their funding.
"Credit institutions' purchases of securities were also reflected in a reversal in the trend of the non-mortgage credit growth, with the annual rate rising to 20.8pc in March, from a revised 18.9pc in February," the bank said.
"This was the first time that the non-mortgage credit rate increased in over a year," it said.
- Charlie Weston
