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News : Irish Last Updated: Apr 24, 2009 - 5:31:05 PM

Central Bank says annual growth rate of Irish residential mortgages dropped to 9.6% in July - the lowest since December 1987
By Finfacts Team
Aug 29, 2008 - 11:26:24 AM

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Source: Central Bank and Financial Services Authority of Ireland

The Central Bank said today that the annual growth rate of Irish residential mortgages, inclusive of securitised residential mortgages, dropped to 9.6 per cent in July.1 The last time the annual rate of increase in residential mortgages was in single figures was at  December 1987.

The Bank said that although private-sector credit (PSC) 2 increased by €3.3 billion during July 2008 – which was above the average monthly increase for the year to date – its annual rate of increase weakened further, falling by one percentage point to 13.3 per cent.3 This was the lowest annual growth rate since July 2002. Growth in non-mortgage credit also slowed in July, falling from 20.2 per cent in June, to 18.8 per cent. Sectoral data for June 2008 showed a continued slowdown in lending to the real estate and construction sectors and, in aggregate, property-related lending 4 as a proportion of PSC declined in June for the fourth consecutive quarter.


Outstanding indebtedness on credit cards fell in July. While new spending amounted to €1.2 billion in the month, the level of payments received, at €1.3 billion, exceeded this. The result was that the level of outstanding indebtedness on credit cards dropped back below €3 billion in July, and its year-on-year increase declined to 10.2 per cent from 11.4 per cent in June.

Residential mortgages increased by €964 million in July, just above the average monthly change for the year to date of €923 million. This is in marked contrast to the monthly increase of €2.4 billion in July 2006 and underlines the extent to which activity in the housing market has contracted. Total outstanding residential mortgages stood at €146.3 billion in July.

The Central Bank said that there were mixed movements in money market interest rates in July. The overnight rate rose by 11 basis points, while the 12-month rate fell by 2 basis points. Funds provided by the Bank as part of the ECB’s monetary policy operations rose by €5.7 billion in July, with main refinancing operations accounting for most of the increase. The euro was 1 per cent lower against the US dollar and 0.4 per cent lower against sterling by end-July. The euro reached a lifetime high against the Japanese yen in July, and increased by 1.6 per cent over the month. Exchange-rate movements resulted in a 0.5 per cent rise in Ireland's average nominal harmonised competitiveness indicator (HCI)5 from 114.9 in June, to 115.4 in July.

Private-Sector Credit

Total lending by credit institutions in Ireland to non-Government Irish residents increased by €3.3 billion in July, or 0.8 per cent, to €396.3 billion. Euro-denominated lending accounted for nearly all of the increase. Lending to non-bank IFSC companies rose by €276 million over the month.

Source: Central Bank and Financial Services Authority of Ireland

Components of Private-Sector Credit

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

  • Term/revolving loans increased by €192 million;
  • Residential mortgages (unadjusted for securitised mortgages) were €1.3 billion higher;
  • Other mortgages rose by €336 million;
  • Loans up to and including one year were €137 million lower; and
  • Overdrafts expanded by €1.1 billion.

Money Supply

Credit institutions in Ireland accounted for €209.9 billion of the euro area’s broad money supply (M3) in July, a monthly decrease of €7.6 billion, or 3.5 per cent. Annually, M3 declined by 10.3 per cent in July, from a year-on-year decrease of 6.8 per cent in June.

Nearly all of the components of money supply declined in July. In general, the negative growth rate reflects an increase in the uptake by money market funds of securities issued by euro-area credit institutions, which are netted out of the money supply contribution. In addition, in July the level of debt securities with up to two years maturity issued by Irish credit institutions fell by €2.2 billion. There was also a fall of €2.9 billion in money-market fund shares/units, while total deposits in M3 declined by €1.4 billion over the month, with most of the decline being in the overnight deposits category.

− Breakdown of Deposits

  • Overnight deposits declined by almost €1 billion;
  • Deposits redeemable at notice of up to three months fell by €322 million; and
  • Deposits with an agreed maturity of up to two years decreased by €141 million.

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


2 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.

3 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.

4 Property-related lending is the sum of lending for real estate activities, construction and residential mortgages (inclusive of securitised mortgages). See ‘Sectoral Developments in Private-Sector Credit’, June 2008,

5 A decrease in the indicator points to an improvement in price competitiveness, while an increase points to a disimprovement.

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