Source: Central Bank and Financial Services Authority of Ireland

• The annual increase in private-sector credit (PSC)¹ of 15.6 per cent in February was the lowest since September 2003.

• The annual increase in non-mortgage credit dropped to 19 per cent.

• Demand for residential mortgages remained weak. The level of outstanding mortgages increased by just over €700 million, with the annual increase being 12.3 per cent.

The Central Bank said today that Irish Private-Sector Credit growth (PSC) in February was unusually small but was affected by the early repayment of a large loan. PSC increased by just €914 million; this is the first time since April 2004 that PSC has increased by less than a billion. The annual increase in residential mortgages was 12.3 per cent − the lowest rate of increase in 14 years

A decline in lending to non-bank IFSC companies was almost offset by increased lending to non-financial corporates. The annual increase in PSC dropped to 15.6 per cent, from a revised 16.6 per cent in January.²

Source: Central Bank and Financial Services Authority of Ireland

After stabilising in January, the annual increase in non-mortgage credit declined by over a percentage point to 19 per cent in February, but this was also affected by the early repayment of the large loan mentioned above. The year-on-year percentage change in outstanding indebtedness on credit cards declined for the sixth consecutive month in February, to 8.2 per cent. Payments received have exceeded new spending during the last two months, bringing outstanding indebtedness on credit cards down to €2.9 billion in February.

The monthly increase in residential mortgages in February was well below last year's level. The monthly increase of just €712 million was the lowest in five years, and brought the average monthly increase in 2008 to date to €768 million. This is similar to the average monthly increase in 2002, when residential mortgage lending increased by just €8.9 billion over the year. However, with the exception of 2007, in general the months of January and February recorded the lowest increases in residential mortgages every year since 1997 (see chart above).

Source: Central Bank and Financial Services Authority of Ireland

The annual increase in residential mortgages (inclusive of securitised mortgages) was 12.3 per cent in February − the lowest rate of increase in 14 years.³ After decreasing in January, market interest rates stabilised in February. Although the overnight rate fell by 15 basis points, the 3-month and 12-month rates rose marginally by 1 basis point and 6 basis points, respectively. Funds provided by the Bank as part of the ECB.s monetary policy operations fell by €2.4 billion in February, with most of the decrease being accounted for by longer-term refinancing operations. The euro reached a lifetime high against both the dollar and sterling during February, rising by 2 per cent and 2.3 per cent, respectively, over the month. The euro was also 0.1 per cent higher against the Japanese yen in February. Despite exchange-rate movements towards the end of the month, Ireland's average nominal harmonised competitiveness indicator (HCI)⁴ was unchanged between January and February, at 111.4.

Total lending by credit institutions in Ireland to non-Government Irish residents increased by €914 million, or 0.2 per cent, in February to €379.1 billion. All of the increase was in eurodenominated lending; non-euro lending fell by €310 million. Lending to non-bank IFSC companies decreased by €1.7 billion over the month.

The changes in the main PSC loan categories on credit institutions. balance sheets in February were as follows:

• Term/revolving loans fell by €862 million;

• Residential mortgages (unadjusted for securitised mortgages) were €907 million higher;

• Other mortgages increased by €17 million;

• Loans up to and including one year expanded by €396 million; and

• Overdrafts rose by €160 million.

Credit institutions in Ireland accounted for €212.6 billion of the euro area's broad money supply (M3) in February, a monthly decrease of €10.1 billion, or 4.5 per cent. The annual rate of increase declined to 1.2 per cent, from a revised 8.6 per cent in January. A sizeable fall in overnight deposits contributed to the overall fall in deposits of €6.3 billion. However, a reclassification of €2 billion in the residency of some short-term deposits from Irish residents to rest of world residents in February contributed to the drop in total deposits included in the money supply. There was also a net fall of €3.1 billion in debt securities with up to two years maturity. In addition, money market fund shares/units fell by €785 million.

• Overnight deposits decreased by €4.9 billion;

• Deposits redeemable at notice of up to three months fell by €480 million; and

• Deposits with an agreed maturity of up to two years declined by €1 billion.

1 The money and credit statistics are provided by all of the credit institutions authorised to carry on banking business in the State under Irish legislation as well as credit institutions authorised in other Member States of the EU operating in Ireland on a branch basis. Credit institutions authorised in other EU Member States operating in Ireland on a cross-border basis, i.e., with no physical presence in the State, are not included in the statistics.

2 Adjusted rate i.e. excluding lending to non-Monetary Financial Institutions (MFI) IFSC entities, which are not associated with the domestic economy, and adjusted for valuation effects caused by exchange-rate movements.

3 The weighted average growth rates of mortgage and non-mortgage credit do not equate to the PSC growth rate because securitisations are included in calculating the adjusted growth rate for residential mortgages, but are not included in PSC.

4 A decrease in the indicator points to an improvement in price competitiveness, while an increase points to a disimprovement. For background, see Box B in the .Domestic Prices, Costs and Competitiveness. chapter of the Bank.s Quarterly Bulletin, No. 2 2007.