Growth in lending slows to 2004 level

Growth in private-sector lending slowed further in September, with the annual increase in lending by credit institutions declining to its lowest rate since early 2004.

Total private-sector credit advanced by banks rose by €8.4 billion during the month, according to the Central Bank, but half of this was money advanced to companies at the International Financial Services Centre to fund offshore financial transactions, and was not associated with domestic activity.

The rate of growth in mortgage lending declined by about 1 per cent in September, continuing a pattern that started in January. The monthly rise in residential mortgages of €1.2 billion was the second lowest so far this year.

National Irish Bank chief economist Ronnie O'Toole said the slowdown in private sector credit reflected the cooling in sentiment towards the housing market and it would be dangerous to read too much about the broader economic environment into the figures. "Much capital investment in the economy at the moment is by foreign multinationals, which often do not use the domestic banks as a source of lending."

Mortgage credit growth is likely to be about 13 per cent for the year, with total private sector growth at 16 per cent, Dr O'Toole predicted. Central Bank statistics show outstanding credit card debt increased by €55 million in September.