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| Source: Central Bank and Financial Services Authority of Ireland
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The Central Bank said today that the annual rate of increase in Irish residential mortgages (including securitised mortgages) continues to fall and the 8.5 per cent increase in September was the lowest since September 1986.1 Applying the average change in residential mortgages over the third quarter to the rest of the year suggests that the end-year growth rate could be around 7 per cent.
The Bank said while the data show a fall in private-sector credit (PSC)2 for the first time since January 2003, the underlying level continued to increase. A number of technical factors caused the decline, rather than more loans being repaid than taken out. First, there was a reclassification in the residency of a large volume of loans by one credit institution. In addition, the closure of an IFSC credit institution removed around €450 million from PSC in September. The result was a decline of €329 million in measured PSC in September, bringing the total outstanding to €399.6 billion, and a substantial decrease in the annual growth rate to 10.7 per cent from 12.9 per cent in August.3 Had these technical factors not occurred, PSC would have increased by over €1.2 billion and the annual rate of increase would have been around 11.1 per cent.
Outstanding indebtedness on credit cards reached €3.1 billion in September, but the annual rate of increase declined to 9.3 per cent, from a revised 10.1 per cent in August. New spending continued to exceed payments received in September, and activity in both categories was higher than that recorded in August.
The Central Bank said after a record low monthly increase in residential mortgages in August, the net monthly change rose in September, to €736 million. This confirms the fact that that, despite tighter lending standards, lending to households for house purchase remains active, albeit at a much slower pace than during the peak of 2006, when the average monthly increase in residential mortgages was close to €2 billion. The annual rate of increase in residential mortgages (including securitised mortgages) continued to fall, however, and the 8.5 per cent increase in September was the lowest since September 1986. Applying the average change in residential mortgages over the third quarter to the rest of the year suggests that the end-year growth rate could be around 7 per cent.
Money market interest rates increased across most terms in September reflecting renewed financial tensions during that month. The 1-month rate rose by 54 basis points, while the 3-month rate rose by 31 basis points. Funds provided by the Bank as part of the ECB’s monetary policy operations increased by €15.4 billion over the month to 26 September, with main refinancing operations accounting for four fifths of the increase. During September, the euro depreciated against the US dollar and sterling, by 2.9 and 1.8 per cent, respectively. The euro fell to a 24-month low against the Japanese yen during September, and weakened by 6.1 per cent by the end of the month. Exchange-rate movements resulted in a 1.1 per cent fall in Ireland's average nominal harmonised competitiveness indicator (HCI)4 from 113.6 in August to 112.4 in September.
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| Source: Central Bank and Financial Services Authority of Ireland
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Private-Sector Credit
Total lending by credit institutions in Ireland to non-Government Irish residents decreased by €329 million in September, or 0.1 per cent, to €399.6 billion. An increase of over half a billion in non-euro lending was more than offset by a decrease in euro-denominated lending. Lending to non-bank IFSC companies rose by €794 million over the month.
− Components of Private-Sector Credit
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Residential mortgages (unadjusted for securitised mortgages) were €919 million higher;
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Other mortgages decreased by €1.9 billion (mainly as a result of a reclassification);
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Loans up to and including one year were €1.2 billion higher; and
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Overdrafts contracted by €117 million.
Money Supply
− Breakdown of Deposits
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 A decrease in the indicator points to an improvement in price competitiveness, while an increase points to a disimprovement.
