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Increase in property lending at eleven-year low (Irish Independent)

04 November 2011

Property-related lending increased at its lowest rate since 1997 in June, new figures from the Central Bank show.

Lending for property now accounts for just half of the increase in credit, down from four-fifths a year ago.

The rate of increase in lending to the construction sector has now declined for seven consecutive quarters and for eight consecutive quarters for the real estate sector.

The growth in mortgage lending in Ireland has fallen to its lowest level in 17 years, according to the latest figures from the Central Bank.

The rate of growth in residential mortgage lending fell to €893m in June, an annual growth rate of 10.2pc.

Average monthly rises for the first half of the year was just above €900m. This increase in residential mortgage borrowing in the first half was more than a third lower than in the same period last year.

The Central Bank said we are back to mortgage lending levels that prevailed in 2003.

Overall lending in the economy in June was the lowest in five years at 14.3pc. This was down from 15.1pc in May. Private sector credit rose by €2.6bn in June. However, the figures are complicated by the issuing of an additional €7bn of new residential mortgage backed securities, which are removed from lenders' balance sheets, and a rise in finance houses' holdings of securities.

Elsewhere, the figures also show a slowing rate of growth in credit-card spending, with overall private-sector credit at its lowest level since 2003.

The annual rate of increase in debts owed on credit cards fell in June to 11.4pc, from almost 12pc in May.

Both new spending and payments received fell, which meant that money owned on credit cards increased by only €10m, the Central Bank said.

This took the total outstanding indebtedness on credit cards to €3bn.

The Consumers' Association said the figures show that people are being more careful with their money due to the economic slowdown and the rising cost of living.

However, there has been no fall in the amount of households' money in deposit accounts earning low interest rates. Just as in May, the June figures show that €39bn sits in savings accounts earning average interest rates of just 1.48pc.

This is despite the fact that there is intense competition in the deposit market at the moment, with a large number of deposit takers offering rates in excess of 5pc.

These high rates are even available on a number of demand deposit accounts.

Personal finance experts have decried the fact that many households with money in banks and building societies are failing to move their money around to secure better rates.