MORTGAGE LENDING continued to contract in the first quarter of the year, with new home loan volumes falling 53 per cent as consumers concentrated on paying down debt.

The Irish Banking Federation (IBF), which released its latest mortgage market profile yesterday, said the pronounced reduction in activity reflected the “broader macro-economic environment” and that lenders generally continued to report “subdued” demand for new mortgages.

The IBF also pointed out that the seasonal pattern of mortgage lending typically results in lower levels of drawdowns in the opening months of the year.

However, mortgage brokers had a markedly different response. Ciaran Phelan, chief executive of the Irish Brokers Association, said brokers had experienced “heightened demand” for mortgages in the first quarter of 2011.

“This unfortunately wasn’t reciprocated with available credit,” Mr Phelan said. “The banks were actually lending more to Irish consumers before they were recapitalised.”

The IBF figures showed that 3,259 new mortgages were issued in the first three months of the year, with a value of € 577 million. This compares with €1.22 billion in the first quarter of 2010.

First-time buyers once again dominated the market, accounting for 40 per cent of new home loans. Mover-purchasers made up 27 per cent. The buy-to-let segment is almost non-existent, accounting for just 4 per cent of loans issued.

“It is clear that hope for a recovery in the housing market will rely on other mortgage market segments,” commented Davy Research.

Davy noted that when the IBF figures are reconciled with monthly statistics from the Central Bank they show households repaid an estimated €2.3 billion in mortgage debt over the quarter.

“We expect mortgage pay-down to continue to outpace new issuance as both banks and households continue to deleverage,” Davy said. “Since the beginning of 2009, household mortgage debt has fallen by nearly €9 billion.”