Lending to Irish households continued to fall last month, dropping by 3.9 per cent, according to new figures from the Central Bank.

Loans for house purchases, which account for 80 per cent of lending to households, declined at an annual rate of 3.1 per cent.

Lending for general consumption and other purposes dipped by 6.5 per cent for the year.

Commenting on the latest figures, Merrion Stockbrokers said credit data continues to “remain the most disappointing” aspect of Ireland’s economic recovery.

Lending to Irish resident NFCs reported a year-on-year decline of 8.2 per cent last month, following on from a 7.3 per cent decrease in June.

The figures also show household repayments exceeded draw-downs by €437 million in July following a net monthly decrease of €104 million the previous month.

In the private sector, the outstanding stock of loans declined by about €9 billion for the month.

Credit institution borrowings from the Central Bank fell by €85 million in July leaving the outstanding stock of borrowings at €23.2 billion.

“While there has been some improvement in the past few months in terms of bank lending, progress continues to be slow,” Merrion said in a statement today.

“Advancing credit to the SME sector in particular is essential if the economy and labour market is to fully recover.”

It said there was more to be expected from lending to households too, which is down almost 4 per cent for the year.

“The financial institutions maintain that this is a demand rather than supply issue and are open for business,” it said.

“If that is indeed the case then one would expect an improvement in the credit figures in the coming months as the economic data in general get better.

"The bottom line is that without significant credit flow into the economy, Ireland will be unable to reach its growth potential over the next few years."