Lending to households continues to fall - Central Bank

Lending to households continued to fall last month, decreasing by 2.7 per cent compared with the same period in 2014 , according to new figures from the Central Bank. It continued the recent trend of year on year falls in lending.

However there were some signs of a turnaround.The latest money and banking statistics showed that during Septmber Irish household new loan drawdowns exceeded repayments by €78 million, representing the first monthly net increase in lending since December 2014.

The Central Bank said the increase was driven by loans for house-purchases, which offset declines in lending for other purposes.

Looking at loans for house purchase, repayments exceeded drawdowns by almost €2 billion over the 12 months to the end of September 2015, while non-housing loans also saw net repayments of €649 million over the same period.

The overall level of savings continued to increase. Household deposits increased by €258 million during September. Over the 12 months to the end of September, household deposits increased by €2 billion, or 2.2 per cent.

This increase was attributable to a 13.2 per cent increase in overnight deposits, while deposits with agreed maturities continued to decline annually.

Merrion Stockbrokers economist Alan McQuaid said that from a long-term perspective “a greater level of credit” will need to flow into the economy to “maintain the positive momentum we’ve seen over the last year or so”.

“However, the fact is that many Irish consumers/households are still burdened with a huge level of outstanding debt from the Celtic Tiger era and are in no hurry to add to that load, though there do appear to be some small chinks of light appearing,” he said.

“As we’ve said on numerous occasions in the past few months, the underlying problem at the moment appears to be as much about the lack of demand for credit as it is about the supply of credit.

“The most recent data from the Banking & Payments Federation Ireland (BPFI) showed that mortgage approvals are on the rise but the stricter lending rules from the Central Bank as regards house purchases will likely have a negative impact on borrowing.”

Credit institutions’ borrowings from the Central Bank as part of Eurosystem monetary policy operations increased by €130 million in September.

The outstanding stock of Central Bank borrowings was €10.2 billion at the end of September, of which the domestic market group of credit institutions accounted for €8.9 billion.