A FOUR-YEAR slide in demand for home loans halted in the first quarter of 2011, with Irish lenders reporting a marginal rise in mortgage appetite.

However, aspiring home buyers faced wider margins on mortgages as banks’ access to money market financing deteriorated, according to the Central Bank.

The monetary authority was citing the responses of five Irish lenders who participated in the April round of the quarterly euro zone bank lending survey.

The banks’ cost of funds, combined with balance sheet constraints and an increased perception of risk, “contributed to a tightening of credit standards” for mortgages, the Central Bank said.

However, a spokeswoman said these factors were not significant enough to cause a “formal” change in lending standards during the first quarter.

The survey also showed that access to wholesale funding markets deteriorated in the opening months of the year, and banks envisage a further weakening in their capacity to access the inter-bank unsecured money market and the market for debt securities in the current quarter.

This follows last month’s prediction by a Department of Finance official that Irish banks are likely to become increasingly dependent on the ECB this year, before beginning to regain access to wholesale markets in early 2012.

Demand for credit among non-financial businesses was unchanged in the first quarter, although a “mild” increase is anticipated in the second quarter, the Central Bank said.

While debt restructuring and reduced facilities from other lenders supported business credit demand, lower levels of fixed investment and a more subdued appetite for mergers and acquisitions acted as a drag.

Demand for consumer credit and other non-mortgage household lending was unchanged in the first quarter.

The wider results of the survey showed euro area banks were tightening credit standards after uncertainty over the economic outlook and their access to market financing increased, the European Central Bank said. – (Additional reporting, Bloomberg)