Household borrowing continues to fall

Decline in consumer and mortgage lending will hamper recovery prospects

Lending to Irish households fell by 4.4 per cent in the year to August. Photograph: Alan Betson/The Irish Times.

Lending to Irish households fell by 4.4 per cent in the year to August. Photograph: Alan Betson/The Irish Times.


Irish households continue to borrow less, with lending down by 4.3 per cent in the year to August 2013, according to statistics from the Central Bank. And, despite a mooted recovery in the housing market, mortgage lending continues to slide, falling by 2.3 per cent.

In August, Irish households repaid more than they borrowed to the tune of €411 million, a development mainly due to the €234 million decrease in mortgages.

Alan McQuaid, economist with Merrion Stockbrokers, said that the figures show little progress in terms of advancing loans to households.

“As a result, this will severely hamper the overall recovery prospects for the housing market and the Irish economy as a whole, and keep the unemployment rate higher than it would otherwise be,” he said.

Lending to Irish businesses also fell during the period under review, down by 4.4 per cent, following a decrease of 4.8 per cent in July.

However, while households are borrowing less, this does not correspond to an increase in saving. According to the Central Bank, household deposits fell by 0.4 per cent in the 12 months to August.

Overall, deposits rose by 7.8 per cent in the period under review, with deposits from financial institutions 25.6 per cent higher than in August 2012, and deposits from Irish based companies up by 6.5 per cent. This annual development is driven by transactions in March 2013 related to the liquidation of Irish Bank Resolution Corporation.

Meanwhile, additional data from the Central Bank shows that Irish banks continue to retrench from international markets. In the second quarter of 2013, foreign claims fell by 6 per cent to almost €100 billion.

“The annual reduction in total foreign claims is expected, given that the

domestic banking groups continue to downsize their operations abroad,” the Central Bank said in a statement. The UK continues to account for almost three quarters of total foreign claims, at some €72.6 billion, a decline of some 7.4 per cent on the previous quarter. Claims to both France and Germany increased during the period under review, up by 3.8 per cent and 6.8 per cent, respectively.

The private sector, which accounts for 81 per cent of claims, reported a 3.5 per cent decline, while claims to the public sector fell by 20.9 per cent, and credit institutions reported a fall of 8.6 per cent.