Big ticket items back on agenda as personal loans soar

Report from banking group shows volume and value of borrowings in the last quarter

Consumers started spending again on big ticket items towards the end of last year, with the volume and value of personal loans jumping by 34.6 per cent and 20.1 per cent respectively year-on-year, according to the banks.

Banking & Payments Federation Ireland (BPFI), which is the representative group for the banks, on Wednesday published its first personal loans report, which covers the final quarter of 2021.

The report, which will be issued on a quarterly basis, details the volume, value and uses of personal loans drawn down from AIB, Avant Money, Bank of Ireland, KBC Bank Ireland and Permanent TSB.

A total of 39,803 personal loans were drawn down in the last three months of 2021, valued at €344 million, representing an increase of 34.6 per cent in volume and 20.1 per cent in value year-on-year.

Looking at 2021 as a whole, more than 140,000 personal loans were drawn down, which was 12.2 per cent more than in 2020. The value of drawdowns rose by 13.5 per cent to almost €1.4 billion.

The average personal loan fell to €8,652.

Purpose of loans

Of the total loans drawn down in the final three months of the year, 10,201 – or more than a quarter – for a cumulative €116 million were for car purchase. The volume of car loans rose by 10.4 per cent year-on-year with the value of those borrowings rising by 3.9 per cent over the same period.

Over the full year, almost 45,000 vehicle loans were drawn down, valued at €488 million. That was up 5.4 per cent by volume and 7.4 per cent by value.

The average car loan stood at €10,474 in the fourth quarter, down from €11,135 a year earlier.

Home improvements accounted for 11,906 personal loans worth €116 million in the final three months of 2021. That was more than a third higher in volume terms and up 20.6 per cent in value terms.

Over the course of 2021, home improvement was the fastest growing segment of the personal lending market, increasing in volume terms by 24.6 per cent to 43,336 and in value terms by 20.4 per cent to €462 million.

The average home improvement loan was €9,748 in the final quarter of 2021, down from €10,899 on the fourth quarter of 2020.

Pandemic effect

BPFI chief executive Brian Hayes said the Covid-19 pandemic had had a negative impact on lending and spending, but that this trend is expected to continue abating in the coming year.

“The report is a brand new set of data published by BPFI providing a comprehensive overview of the numbers and types of personal loans which are being drawn down by consumers,” he said.

“For the first time ever, these new figures are giving us an insight into the significant scale of personal lending by BPFI members.

“Current loan volumes equate to 2,756 loans drawn down per week, 864 of which are for car or auto loans and 833 of which are for home improvements. We plan to publish this data on a quarterly basis and expect to see some interesting trends emerging over time.

“The Covid-19 restrictions had a substantial negative impact on lending activity, especially in the second quarter of 2020, but with improving consumer confidence, we expect demand for personal loans to increase in 2022.”