Monthly statistics from the Central Bank show a net fall in mortgage lending in May for the second month in a row, due to continuing low levels of activity in the housing market. This means that repayments on existing mortgages were greater than new mortgage lending.
This happened in April for the first time since the Central Bank began recording the monthly statistics in 1990. In May, mortgage lending fell by €18m, bringing the annual growth rate to an historic low of 2.6%.
The figures also show that the total amount of debt owed on credit cards fell by €23m during May as repayments again exceeded new spending. The Central Bank says the amount of new spending on credit cards is now back to 2006 levels.
Overall, lending in the economy grew at an annual rate of just 0.8% in May, another record low. Total lending in May dropped by €1 billion, after a €1.8 billion fall in April.
First time buyers' affordability improving
Despite recent reductions in people's incomes, affordability for first time buyers continues to improve. The latest EBS/DKM affordability index stands at 14.2% nationally - a level last recorded in the mid-1990s.
The index is a measure of the proportion of after tax income required to meet first year mortgage repayments for an average first time buyer working couple - on average earnings - with a 90% mortgage.
Today's index reveals that the average working couple buying their first home is now paying around 14.2% of their net income in mortgage repayments. This compares with the peak in December 2006 when payments were equivalent to 26.4% of a couple's income.
The EBS says that by the end of July 2009, the proportion of net income required to meet first time buyers' repayments will have fallen further to 13.9%. This compares to 21.8% in July of last year.
The index says the net monthly mortgage repayment for the average first time buyer is around €749 compared with €1,203 last July, a fall of €454 or almost 38%.
Dara Deering, from the EBS, said that the real cost of buying a first home has significantly reduced despite people's income contracting after the supplementary budget in April.
'However, balanced against this is the fact that house prices have continued to decline, interest rates are at a record low and as a result affordability has returned to the levels of the mid-1990s', she added.
She said that with many developers now offering much lower prices for new developments - especially in Dublin - first time buyers should find it easier to get good value and take their first step onto the property ladder.
