Irish consumers continue to save for a rainy day

Some €540m poured into Irish deposits in March despite record low rates of return

Irish consumers are still preparing for a rainy day – latest figures from the Central Bank show that Irish consumers are now saving more than they’re borrowing.

Irish consumers are still preparing for a rainy day – latest figures from the Central Bank show that Irish consumers are now saving more than they’re borrowing.

 

Irish consumers are now saving more than they were in the aftermath of the banking crisis when deposit rates were more than 3 per cent, new figures from the Central Bank show.

In March 2017, some €540 million was placed on deposit by Irish resident households, bringing the total to €98.1 billion, the highest level since April 2010. Given record low rates available for both fixed and instant access accounts, it’s no surprise that almost three-quarters (73 per cent) of deposits are now overnight, compared to about 50 per cent back in April 2010. On an annual basis, household deposit lodgments were €2.9 billion higher than withdrawals, growing by 3.1 per cent over the year.

Mortgage loans

Lending, however, continued to fall, down by 2.2 per cent in the year to end March, although there was an uptick in mortgage lending. Mortgage loans grew by €127 million in net terms in March, following a decrease of €174 million in February. On an annual basis, however, mortgage lending is also down, by 0.8 per cent or €622 million.

Merrion Capital economist Alan McQuaid says the weak lending figures continue to be of concern.

“The bottom line is that credit will need to flow at a much stronger level than currently if the economy is to grow to potential over the long run,” he says.

With Irish homeowners now saving more than they’re borrowing, Irish households are net funders of the Irish banking system. Indeed as the Central Bank figures show, banks held € 9.5 billion more household deposits than loans at the end of March, though this figure represented a slight decline on February’s holdings. By contrast, in early 2009, household loans exceeded deposits by €53.5 billion.