Savers withdraw €541m amid plummeting deposit returns

Irish consumers withdrew more than €500 million in deposits in February amid plummeting returns, the latest set of private sector credit figures from the Central Bank show. The figures also reveal that banks now hold € 3.6 billion more household deposits than loans.

Mortgage lending continues to decline, falling by 2.4 per cent or by €327 million in the year to February, with households repaying € 1.9 billion more than was advanced in new loans.

And it’s not just mortgages that Irish consumers are paying down; the figures also show that the amount of outstanding non-housing related loans fell by € 48 million in February, down by 3.9 per cent in the year.

For Alan McQuaid, economist with Merrion Stockbrokers, the lending data remains a cause for concern.

“Households and businesses may still want to pay down out-standing debt, and with the cost of funding remaining high, particularly compared with the Eurozone average, there is no incentive to take on new borrowings,” he said, adding that if the Irish economy is to grow to its potential over the long-term, “credit will in our view need to flow at a much stronger level”.

Savings

As deposit rates continue to plummet, savers withdrew some €541 million from deposit accounts during February. However, on an annual basis the value of savings continues to rise, up by 2.7 per cent in the year to February, up to €94.9 billion, and savers continue to favour instant access and short-term notice accounts.

The data also shows that Irish households were net funders of the Irish banking system for the eighth consecutive month, something which has not happened since the late-1990s . Banks now hold € 3.6 billion more household deposits than loans. This compares with early-2009, when household loans exceeded deposits by € 53.5 billion.