Growth in lending to Ireland's private sector was the weakest in five years in December as the cooling property market took mortgage growth to a 12-year low.
Overall private sector credit growth slowed to an annual rate of 17 per cent last month from 17.1 per cent in November and was the weakest rate of expansion since December 2002, according to the Central Bank.
December's level was well below a peak of 30.3 per cent hit in June 2006 when the central bank warned that Ireland's then-booming property market was fuelling unsustainably high rates of lending growth.
Total private sector credit rose €4.1 billion or €1.1 per cent in the month, bringing the outstanding level at the end of December to €376.8 billion.
"The monthly rise would have been over €6 billion, had it not been for an asset-backed securitisation of residential mortgages," the central bank said.
For 2007 as a whole, the bank said there had been an unusually large rise in lending to non-bank companies registered in Dublin's International Financial Services Centre which does not usually reflect activity in the domestic economy.
"Some of the rise was accounted for by loans to special purpose vehicles (SPVs) to finance offshore financial transactions," the bank said. "There was also evidence that some credit institutions reorganised their funding structures as a result of the recent turbulence in the credit markets."
Growth in residential mortgage lending slowed to an annual rate of 13.4 per cent from 14.2 per cent in November and was the weakest since December 1995 after an end to Ireland's decade-long property boom when house prices quadrupled.
"The December increase in outstanding residential mortgages of €1.4 billion equalled the average for the year, and brought total outstanding mortgages to €139.8 billion," the bank said.
Over the course of 2007, the total amount of mortgage borrowing increased 16.6 billion euros, which was 30 per cent less than in 2006.
"Although housing supply remained strong during the year, with completions expected to be around 78,000 units, and good supply in the second-hand market, mortgage demand failed to recover from a weak start to the year," the bank said.
"Rising interest rates . . . and uncertainty over stamp duty reform, may have tempered demand. While falling house prices have been positive for affordability, uncertainty as to future developments may have affected potential purchasers."