Property related lending accounted for 61 per cent of total outstanding Irish private sector credit in Q2 2009 - - the proportion in the corresponding quarter of 2008 amounted to 62 per cent of total lending.

The Central Bank said in its quarterly sectoral loans report, that Irish private-sector credit (PSC) outstanding in Q2 2009 was marginally lower than that recorded in Q2 2008. This was mainly due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts, while the underlying stock of credit to the private sector was relatively unchanged on an annual basis. PSC fell by €4.7 billion during Q2 2009, or 1.2 per cent, with credit to almost all economic sectors declining over the quarter. The Bank said this broad based decline indicates a continuation of the slowdown in underlying credit growth witnessed since the autumn of 2008.

The Bank said a reduction in the underlying stock of credit during Q2 was more pronounced than negative valuation effects due to write-downs, increasing bad debt provisions and exchange rate movements. Survey evidence from the main credit providers suggests both reduced demand for credit and continued tightening of credit standards by lenders are impacting on credit developments.

While property related lending was relatively unchanged on an annual basis in Q2 2009, combined lending to the non-property related business sectors and for non-mortgage personal lending was 8.9 per cent lower in Q2 2009 compared with Q2 2008.

Total property related lending fell on a quarterly basis by €1.9 billion in the second quarter of 2009. This compares with a fall of €1.4 billion in Q1 2009, and an increase of €6.5 billion in Q2 2008. Property related lending accounted for 61 per cent of total outstanding PSC in Q2 2009.

Total residential mortgages outstanding decreased by €194 million over the second quarter of 2009. The combined decline in mortgages for buy-to-let properties and holiday homes, of €38 million, accompanied a fall of €157 million in mortgages for principal dwelling houses. This was the first quarterly decline in outstanding residential mortgage credit on record.

Lending to the personal or household sector is dominated by residential mortgages. Non-mortgage related personal sector credit has declined consistently for five quarters. However, the pace of contraction in this form of credit eased in Q2 2009 compared with the previous quarter, falling by €368 million during the quarter. Over the year to the end of Q2 2009 this category of lending declined by 11.5 per cent, compared with an annual increase of 5.5 per cent in the same period in 2008.