Lending to households and companies fell in November, continuing the downward trend seen in recent months.

The latest tranche of Central Bank figures showed lending to households declined by €264 million in the month of November, following a net monthly decrease of €515 million in October.

Mortgage upturn

Loans to Irish households were 3.6 per cent lower in the year ending November 2012. This follows a decrease of 3.7 per cent for each of the previous three months. Non-mortgage loans drove the November decrease as credit advanced for house purchases turned positive. There was an increase of €3 million in loans for house purchase, while loans for consumption and other purposes fell by €267 million for in the month.

Lending to Irish resident non-financial corporations (NFCs) declined by 3.9 per cent in the year ending November 2012. This follows a decrease of 4.2 per cent for each of the previous two months.

Meanwhile, Irish private sector deposits, including those of households and companies, increased 2.2 per cent year-on-year.

Deposits from Irish households were 1.4 per cent higher on an annual basis, while deposits from insurance corporations and pension funds and other financial intermediaries rose by 6.8 per cent.

Company deposits fall

Deposits from Irish non-financial firms fell by 1.5 per cent over the same period. Private-sector overnight deposits decreased by €522 million in the month, largely reflecting developments in the non-financial corporate sector.

For the Ireland-based banking system as a whole, including Dublin’s financial services centre, deposits continued to fall. In November deposits reached yet another post-crisis low, falling below €500 billion for the first time.

The month-on-month decline of €7.6 billion in November was mostly accounted for by deposit withdrawals by non-euro area residents.

Although there has been some sign of improvement in Irish resident deposits in the past few months, the message from the data is still one of overall weakness and difficulties in the banking sector.

Commenting on the overall figures Merrion economist Alan McQuaid said: “At the end of the day the lack of available credit will severely hamper the overall recovery prospects for the economy as a whole and keep the unemployment rate higher than it would otherwise be.”