DUBLIN, Nov 8 (Reuters) - The number of new mortgages issued in Ireland rose annually in the third quarter for the first time in six years according to a survey released on Thursday, the latest sign that the property market may be stabilising.
Irish house prices have fallen by half since the bursting of a huge property bubble in 2008. Fears of further price falls and tight credit conditions saw the value of mortgage lending fall to the lowest level since the crisis began earlier this year.
But almost 4,000 new mortgages were issued in the three months to the end of September, up nearly 25 percent on the previous quarter and 10 percent on the same period last year, the Irish Banking Federation/PwC quarterly mortgage survey showed.
The value of those mortgages - 663 million euros ($845.65 million) - was also the largest since the end of 2010 although when added together, the 2 billion euros lent over the past four quarters compares to a 40 billion euro annual peak in 2006.
First-time buyers drew down half the number of new mortgages and economists cautioned that the government's offer of mortgage interest relief to those who buy their first home before the end of the year likely contributed to the overall rise.
"This improvement in activity echoes the increase in the number of property transactions reported by the new property register and supports the stabilisation in house prices seen recently," Goodbody Stockbrokers economist Juliet Tennent wrote in a note.
"However, mortgage relief for first time buyers is likely to be encouraging this segment of the market and it remains to be seen if these positive trends continue after the end of 2012 when the relief is due to expire."
Economists say a stabilisation of the property market is vital to allow Irish banks and households to recover and generate the growth needed to pay off debts that forced Dublin to seek an international bailout.
Data published by Ireland's Central Statistics Office last month showed that house prices rose by 0.9 percent month-on-month in September, the fastest monthly growth recorded in five years.
Credit remains tight however as banks deal with rising mortgage arrears. Belgian financial group KBC's said on Thursday that the level of home mortgage arrears at its Irish unit rose to 16.9 percent at Q3 from 15.9 percent in Q2.