LENDING TO households and companies declined sharply in September, falling €4.4 billion compared to August, according to new figures from the Central Bank.
The drop in credit follows declines of €3.4 billion in July and €1.5 billion in August.
On an annual basis, the value of private sector credit flowing through the economy is down 3.4 per cent, at €378 billion.
Residential mortgage lending fell by €14 million during the month – the sixth consecutive month of decline, prompting the Professional Insurance Brokers Association (Piba) to once again call on the Government to introduce urgent measures to “defrost” the freeze in bank lending.
“Unless the issue is tackled, recovery will be needlessly prolonged,” said Rachel Doyle, Piba’s director of mortgage services.
First-time buyers are the worst affected by the squeeze on new lending, Ms Doyle added.
“While all the indications are that property prices are bottoming out, the freeze on normal lending and irrational new criteria for those seeking mortgages means they could be losing out on what may be the best value properties ever available.”
The latest house price index published by Permanent TSB and the Economic and Social Research Institute (ESRI) showed that house prices fell 1.1 per cent in September and have declined 11.1 per cent so far in 2009. National house prices are now back to levels last seen in December 2003.
Valuation effects – writedowns of loans, increased provisions for bad debts and exchange rate movements – accounted for around three-quarters of the €4.4 billion (or 1 per cent) decline in private sector credit during September, the Central Bank said.
The Central Bank’s monthly update reflects the findings of a euro zone bank lending survey published earlier this week, in which Irish banks reported that credit standards had tightened, while demand for loans from households and companies had also fallen.
Outstanding indebtedness on personal credit cards increased slightly during the month, but remains unchanged on a year-on-year basis.
September is only the second month so far in 2009 where new spending on personal cards exceeded repayments.
However, the Central Bank said gross new spending on personal credit cards continues to decline on an annual basis and is now almost 15 per cent lower than in September 2008. This reflects other measures of consumer spending, such as retail sales.
