Irish borrowers draw down €141m for home improvements in second quarter

Value of drawdowns for car and auto financing fell slightly in second quarter, in line with falling sales

Irish borrowers drew down more than €414 million in personal loans between April and the end of June, up 20 per cent on the same period last year and the most since 2020, the first year of the pandemic.

New data from the Banking and Payments Federation of Ireland (BPFI), the lobby group for the banking sector, indicates that household drawdowns to fund home improvements as well as weddings, holidays and other categories of spending ballooned in the second quarter compared with the second quarter of 2021, when Covid restrictions were widespread.

The value of drawdowns for car and auto financing, meanwhile, fell slightly in the second quarter.

Across Europe, banks reported that household demand for credit continued to increase in net terms in the second quarter of the year, largely due to the resurgence in consumer demand following the lifting of public-health restrictions. This increase happened despite a tightening of lending policies by banks in the second quarter due to higher risk perceptions arising from concerns about the economic outlook, the European Central Bank highlighted in its euro-area bank survey last month.

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The BPFI figures indicate that, in the second quarter, Irish borrowers drew down some €141 million for the purpose of funding home improvements, up 12.7 per cent on the same quarter of 2021.

Drawdowns of loans for other purposes — including education, weddings and holidays — also increased by 59.2 per cent year on year to €146 million.

The value of loans for car or auto finance, however, declined 0.4 per cent over the period to €128 million. Recent figures from the Society of the Irish Motor Industry showed the volume of new car sales declined by 22 per cent year on year in June and again by more than 17 per cent in July as consumers grappled with rapid and steep increases in the cost of living amid soaring inflation.

Overall, borrowers drew down more than €1.5 billion in the 12 months to the end of June, 4.7 per cent more than in the 12 months to the end of March.

Separately, figures published by the BPFI in June showed the average mortgage drawdown by first-time buyers in the second quarter of this year was €263,312, up 13 per cent from a year earlier and the highest level since the BPFI began compiling this data in 2003.

The previous high was €251,831 in the first quarter of 2008, just months before the global financial crash.

Some 11,985 mortgages were drawn down between April and June, up 24.5 per cent on the same period in 2021. In value terms, the rise was 40.6 per cent to an aggregate total of €3.13 billion.

Ian Curran

Ian Curran is a Business reporter with The Irish Times