Household lending increased in August, says Central Bank


HOUSEHOLD LENDING increased in August for the first time this year, with the positive flow of borrowing driven by a net €309 million in new mortgage lending during the month.

The monthly money and banking statistics from the Central Bank imply that the drawdown of loans for buying houses was higher than repayments on mortgages during the month.

The net flow of household lending, including non-mortgage loans, was €228 million.

However, net lending to businesses over short and long terms fell in August by over €200 million in each case, indicating that credit to businesses remains at subdued levels. Overall, loan repayments in the business sector, excluding financial companies, were €386 million greater than the drawdowns made during the month.

On an annual basis, lending to businesses has declined 2.2 per cent in the year ending August 2010, with longer-term loans continuing to exhibit the most significant contraction, the Central Bank said. These loans were down 10.6 per cent year-on-year. The use by businesses of short-term lending facilities such as overdrafts has increased in recent months.

The main domestic banks and building societies borrowed a net €2.1 billion from the Central Bank in August. This brings the total borrowed by these institutions to €60.4 billion.

Despite the pick-up in household lending in August, the average figures for lending in this category remain in negative territory over three-month and annual periods. Loans to households fell 3.9 per cent in the year to August 2010, with this rate of decline easing from the 4.7 per cent drop recorded in July.

On an annual basis, the decline in mortgage lending is beginning to level off, with these borrowings down 0.7 per cent in August 2010, compared to a year earlier. Other consumer lending is down 14.9 per cent over the period, reflecting the extent to which consumers have cut back on spending and more stringent credit criteria.

Private sector deposits were down 1.9 per cent over the year to August, with the annual rate of change in deposits from households falling 3 per cent, the Central Bank statistics show.