BANK LENDING to the private sector stopped growing in June, posting the first annual drop since the Central Bank started recording it in 1993.

The latest official figures show that the rate of change in lending to the private sector “turned negative” in June, shrinking by 0.7 per cent.

This followed an annual growth rate of 0.7 per cent in May and compares to an annual growth of 14.3 per cent in June last year.

A breakdown of the overall figures shows the value of outstanding residential mortgage loans fell by €62 million in June, the third consecutive month of decline.

The Central Bank said mortgage debt had remained “relatively stable” since the beginning of 2009, only increasing by €234 million in the first half, compared to €5.5 billion for the same period of 2008.

The annual rate of increase in residential mortgages fell from 2.6 per cent in May, then the lowest on record, to 1.9 per cent in June.

Total private-sector lending fell by €1.4 billion in June, following monthly falls of €1.8 billion and €1.6 billion in May and June.

The Central Bank said this included a reduction of €2.4 billion in credit outstanding to businesses.

This drop can be attributed mostly to “a reduction in the underlying flow of credit” to businesses, but the bank said write-downs of existing loans and increased provisions had also contributed.