THE RISE in new mortgage lending dropped to its lowest level for 22 years in November as the housing market bore the brunt of the economic contraction, new Central Bank figures show.

Although residential mortgage lending increased on average by more than €850 million in the months between January and September last year, the net monthly annual increase fell to €96 million in November.

This represents a rise in absolute terms from the €26 million increase in October, when the annual rate of increase was 7.6 per cent. However, the Central Bank said the 6.7 per cent annual rate increase in November was the lowest since 1986.

In line with a general downward trend seen since mid-2006, the annual rate of increase in private sector credit fell to 8.4 per cent in November from 8.9 per cent in October.

With total lending by credit institutions rising by €539 million in November to €401.8 billion, the annual rate of increase was half that seen a year earlier.

In addition, the Central Bank said most of this new lending reflected "lending to non-financial corporations". In a note, stockbrokers Bloxham said such lending was "not generally associated with activity in the domestic economy".

Bloxham added that the annual rate of increase in private-sector credit is now below the euro-zone average, "having been running three times higher" in 2006.

New credit card spending also fell in November, the figures show. The total amount spent on credit cards was slightly in excess of €1 billion, the lowest level since April 2006 and down from €1.21 billion in November 2007.

"The slowdown in credit growth is symptomatic of a consumer sector that has become increasingly more cautious in recent months as the global credit crunch and the deteriorating Irish economic outlook have significantly increased fears about domestic employment prospects going forward," wrote Bloxham analyst Jason Somerville.

"Against this background, it is likely that consumers will remain very cautious in 2009, saving rather than spending or borrowing. As such, we believe that both overall private-sector credit growth and mortgage-lending growth will continue to fall in the coming months."

The Central Bank said money market interest rates fell sharply in November, in response to the 50-basis-point cut in the European Central Bank rate and "market expectations of further reductions".