Irish mortgage lending fell to its lowest level in 21 years during July, according to new figures from the Central Bank.
The number of home loans taken out during the month dropped to 9.6 per cent last month, the slowest rate of increase since 1987, and down from 10.2 per cent in the preceding month.
Residential mortgage lending increased by €964 million last month, just above the average monthly charge for the year to date of €923 million.
However, this is in stark contrast to the €2.4 billion increase recorded in July 2006 and underlies the extent to which activity in the housing market has contracted.
Total outstanding residential mortgages reached €146.3 billion last month.
Overall lending rose 13.3 per cent during July, the lowest annual growth rate since July 2002. Total lending by credit institutions increased by €3.3 billion, or 0.8 per cent to €396.3 billion.
Growth in non-mortgage credit fell from 20.2 per cent in June to 18.8 per cent in July. Although new spending amounted to €1.2 billion in the month, the level of payments received, at €1.3 billion, exceeded this.
The result of this was that outstanding indebtedness on credit cards dropped back below €3 billion last month and its year-on-year increase declined to 10.2 per cent from 11.4 per cent in June.
Commenting on the latest figures, Alan McQuaid, chief economist at Bloxham Stockbrokers, said: "The bottom line is that the downward trend in Irish credit growth is likely to continue for the foreseeable future. Indeed, it won’t be too long in our view before the annual rate of increase in overall credit demand will be running in single digits as well and below the Eurozone average.
"With the outlook for the Irish economy looking quite bleak over the next six to 12 months, credit growth is likely to weaken further going forward, and the unadjusted residential mortgage lending growth figure could turn negative before the year is out."
Dr David Duffy, of the Economic and Social Research Institute, warned it could be at least a year before things started to pick up.
"In the economy there are no signs of recovery, significant recovery, until the second half of 2009. The short term is going to be difficult," he said.
"The fact that growth has now gone to single digits, it's another example of how much things have slowed down in the housing market and that people are much more cautious."
Dr Duffy pointed to low consumer confidence, which halved in the last year, according to the IIB Bank/ESRI report earlier this week, and an uncertain economic future and fears over the jobs market for the dramatic decline.
"You are still seeing lending, you are still seeing activity, but it's much more subdued. We have some reports in the media of banks tightening up their lending criteria.
"The other thing that could be happening is, even if people have lending approved, they are not taking it up.
"Consumer confidence has dropped. I think it's unlikely that we will see a significant turnaround in the medium to short term."
