DUBLIN: The news raises concerns about the cost of loans and what will sustain lenders and the domestic economy in the long term.
Repayments of mortgages exceeded drawdowns of new home loans by €1.9 billion in the year to the end of October, and the stock of other household loans also fell.
After increasing for the first time in nine months in September, mortgage loans fell in the month by €253 million.
Meanwhile, the stock of lending to Irish businesses also fell in the year. Business lending fell 7.7% in the year — up from a 6.1% drop in September — as demand for loans of up to one year and over five years fell.
The Central Bank said however the drawdown of business loans of between one and five years increased significantly.
“For the time being the Irish economy continues to prosper, despite the weak credit numbers, but from a long-term perspective a greater level of credit will need to flow into the economy to maintain the positive GDP growth momentum,” said Alan McQuaid, chief economist at Merrion Capital.
“However, the fact is that many Irish consumers/households are still burdened with a huge level of outstanding debt from the Celtic Tiger era and are in no hurry to add to that load,” he said.
“It has been pointed out to us that the real issue is the price of credit.
Even with record low eurozone interest rates, small businesses are reporting that the cost of servicing loans here in Ireland has risen quite sharply, which is unsustainable in the long-run,” said Mr McQuaid.
