DUBLIN, Oct 31 (Reuters) - Growth in lending to Ireland's private sector slowed to a fresh six-year low in September, with a falling property market and a contracting economy pushing mortgage growth to its weakest level since 1986.
Private sector credit growth slowed to an annual rate of 10.7 percent in September, the lowest since April 2002, Central Bank of Ireland data showed on Friday. August's 12.9 percent had been the weakest since July 2002.
That was well below a 30.3 percent peak hit in June 2006 when the bank warned the then booming property market was fuelling unsustainably high lending growth.
Private sector credit (PSC) fell by 329 million euros in September, or 0.1 percent, bringing the total outstanding level to 399.6 billion euros ($521.7 billion).
"The reclassification of 1.4 billion euros from resident to non-resident credit resulted in a fall in PSC in September," the central bank said.
The bank added that the closure of a credit institution based at Ireland's International Financial Services Centre removed around 450 million euros from private sector credit, which also contributed to September's drop.
"Had these technical factors not occurred, PSC would have increased by over 1.2 billion euros and the annual rate of increase would have been around 11.1 per cent," the bank said.
Growth in residential mortgage lending, including securitised mortgages, slowed to an annual rate of 8.5 percent from 9 percent in August marking the lowest year-on-year increase since September 1986.
Hit by the global credit crisis and falling house prices after a decade-long property boom, Ireland became the first euro zone economy to enter recession this year.
The rapid slowdown has taken its toll on retail sales and the bank said the annual rate of increase in credit card debt fell to 9.3 percent last month from 10.1 percent in August.
Credit institutions in Ireland accounted for 213.3 billion euros of the euro area's broad money supply (M3) in September, a monthly increase of 851 million euros or 0.4 percent.
That meant there was an annual rate of decline in M3 money supply of 6.8 percent in September after a 9.6 percent drop in August.
(Reporting by Jonathan Saul; editing by Patrick Graham)