A survey carried out by the Central Bank has found that banks tightened up on lending for mortgages in the second quarter of this year, while lending standards for businesses remained unchanged from the first quarter.
Tighter credit standards usually mean higher interest rates, or more restrictive terms and conditions for loans.
According to the Central Bank, the five Irish banks which took part in the survey reported that demand for credit from firms and households weakened in all categories during the three months.
In contrast to previous surveys, banks found it more difficult to gain access to funds on international markets.
The Central Bank said Irish banks saw little change in the situation in the third quarter of this year.
The Irish survey feeds into a eurozone survey compiled by the European Central Bank, which also showed that more banks tightened their lending rules in the second quarter, though mortgage lending showed a strong increase in June.
Concern raised over Irish mortgage market
Irish mortgage holders are uniquely vulnerable to rising interest rates compared to many of their EU counterparts, because of the prevalence of variable rate mortgages here.
The new research follows the Financial Services Ombudsman's warning yesterday that lenders should not try to move people off low-rate tracker mortgages to higher interest variable ones.
According to figures from the European Mortgage Federation, 84% of mortgages issued in Ireland in the last six months of 2009 were variable.
The Irish Mortgage Corporation warns that this makes Ireland one of the most sensitive mortgage markets in the EU, as long-term fixed-rate home loans are more common in the rest of the union.
Almost a quarter of German home loans issued are fixed for more than ten years.
Up to 80% of home loans in Belgium are fixed for the duration of the loan.
Other markets, like the US, have caps on the potential rise in interest charged on variable mortgages.
All mortgage lenders in the Irish market have put their variable rates up by between .5% and 1.5% in the past year, and further increases are expected.
This is without any rates increase at the European Central Bank, whose rates have been at 1% since May 2009.
