First mortgage lending fall since 1990

The value of outstanding mortgage loans fell for the first time last month as the pace of repayments outstripped the value of new lending, according to monthly Central Bank data.

Outstanding mortgage debt dropped by a net €100 million to €148.2 billion with the bank noting this reflected “low levels of activity in the housing market”, despite significant interest rate cuts and falling house prices.

This is the first time, since records began in 1990, that the value of residential mortgage loans have declined.

In April last year just under €1 billion worth of mortgage loans were issued.

Alan McQuaid, economist at stockbroking firm Bloxham, said the cutting of interest rates by the European Central Bank (ECB) to an historic low of 1 per cent in May “has failed to halt the downward trend in private-sector credit”.

However, Mr McQuaid said there was evidence of some stabilising of the current credit tightening cycle contained in the ECB’s April Bank Lending Survey.

This showed that in the first quarter the percentage of banks reporting a tightening of credit standards on loans and credit lines to enterprises was 43 per cent, which was 21 pre cent lower than the fourth quarter.

He said unconventional stimulus measures announced by the ECB were not ambitious enough to reverse this trend and were “unlikely to have much impact on consumer borrowing” in the short-term.

Private sector credit fell by ¤1.5 billion due to tighter credit standards and a fall-off in demand bringing the annual rate of increase to just 2.4 per cent, the lowest since January 1994.

This compares with a 15.9 per cent increase in private sector credit in April last year and continues a downward trend evident since mid-2006.

Lending to non-financial corporates, ie businesses, dropped by €900 million, with a fall in outstanding loans accounting for almost the entire decline.

Although credit card repayments exceeded new spending in April the level of outstanding indebtedness rose by €53 million following the posting of stamp duty to credit card accounts last month.

This brought the rate of increase in credit card debt to 0.8 per cent in April, from 1.1 per cent in March.

Irish residents spent €180 million less in April on their credit cards compared to the same month last year.