10 ways Irish consumer behaviour has changed since 2008
The Crash – 10 years on: habits have been transformed, from switching providers to buying own-brand to shopping online
‘I don’t know what a tracker mortgage is.’ You do now, pal
1: Tracking the trackers
It is hard to imagine there was a time when a man could stand up on a bus – even a man in an ad – and admit to not knowing what a tracker was. Over the past 10 years everyone has learned what a tracker is, not least because the mortgages have been at the centre of the “worst consumer rip-off in the history of the State”, according to Fianna Fáil finance spokesman Michael McGrath.
In the immediate aftermath of the crash, a tracker mortgage scandal saw 30,000 homeowners wrongly forced off the discounted loans by unscrupulous banks operating in a “culture of greed”. More widely, trackers helped expose inequities and rip-offs across the Irish mortgage market.
About 400,000 homeowner have European Central Bank-tied trackers and so pay thousands of euro less each year in repayments than those with loans of exactly the same value who either never boarded, or were not allowed to board, the ECB gravy train. People on variable rates in the Republic still pay more than twice the euro zone average.
2: Regaining confidence
In 2006 our Consumer Confidence Index score, as measured by Nielsen, soared like Icarus. The market research company measures attitudes on topics including personal finance and job prospects, with scores over 100 suggesting optimism and scores below indicating pessimism. In 2006 we had a not-too-shabby total of 120. But then we flew too close to the sun and, between 2006 and 2008, our confidence fell to 60 per cent.
It bobbed along the floor for years before starting to climb slowly. It has now edged past 100 again and we are now among the most upbeat countries in Europe.
3: Buying own-brand in the supermarket
Before the crash less than 10 per cent of the average Irish shopping trolley was made up of own-brand products. Today more than 50 per cent of what we buy is own-brand. Aldi and Lidl – which used to be considered oddities in the Irish retail space – now take almost €1 out of every €4 we spend on groceries. Aldi, Lidl and, more recently, SuperValu and Dunnes Stores have proved themselves to be astute at tapping into what Irish consumers want. They have tweaked their product lines and offered more Irish produce, and their ranges have improved dramatically.
4: Household wealth regained
The wealth of the nation has been on a rollercoaster over the past 10 years. The net worth of Irish households has risen almost two-thirds since 2012, thanks to surging property prices.
The latest Central Bank figure puts the net worth of Irish households at €686.3 billion – up from €430 billion five years ago, and just 4.6 per cent lower than its peak of €719.6 billion in the second quarter of 2007. Net worth rose €16.9 billion or 2.5 per cent in the second quarter of this year, reflecting a substantial increase in housing assets (€16.1 billion) and a decrease of liabilities (€1.5 billion) over the quarter.
5: Still in debt
While our debt levels are improving, the picture is still far from great. Irish household debt as a proportion of disposable income fell 50 per cent between 2013 and June this year, compared with just 3.3 per cent in the euro zone as a whole. Overall, Irish household debt was €141.7 billion – or €29,576 per capita – in June, which equated to 145.2 per cent of disposable income, having peaked at some 215 per cent in 2011.
Despite the improvement, Irish households remained the fourth most indebted in the European Union (behind Denmark, the Netherlands and Sweden).
6: Introducing Pips - personal insolvency practitioners
Debt relief notices, debt settlement arrangements and personal insolvency arrangements overseen by personal insolvency practitioners and a dedicated Insolvency Service would have been unthinkable a decade ago. But as chronic indebtedness started to drag people down after the crash, it became clear the systems in place for dealing with those in financial difficulties were either nonexistent, amateurish or arcane.
The Insolvency Service of Ireland is not without its critics, but it has helped a small number of people pull themselves out of the debt swamp.
Meanwhile the shortening of the period of bankruptcy from an absurd 12 years to three years – and then subsequently to 12 months – has meant that at least now there is a somewhat modern system in place to allow people to handle their debts without being completely destroyed.
There were only 132 personal insolvency arrangements approved between June and September compared with 218 in the previous three-month period, according to the latest quarterly figures. The decline is said to be caused by banks fighting against them.
7: Price inflation
The Groceries Order, which banned the selling of goods at below their invoice price, was introduced in 1987 to stop small shops being driven out of business by large supermarket chains.
Two decades later it was blamed for many of the rip-off prices that Irish consumers were being asked to pay because, the argument went, banning the sale of goods below the invoice price artificially inflated prices.
It was scrapped in 2006, but prices did not tumble as we had been told they would – and supermarket chains in the State continued to be inexplicably more expensive than the same chains in the UK. There was one exception. Almost as soon as the ban on below-cost selling was lifted, big supermarkets started using cheap booze to drive footfall, which has led to the imminent introduction of minimum pricing on alcohol.
8: Net gains
Over the past 10 years the internet has transformed how consumers shop for everything from concert tickets and holidays to clothes and food. Irish people spent about €9 billion online last year, with spending set to grow to €14 billion by 2021. The smartphone has transformed it even further: according to Retail Ireland, last year saw a 74 per cent increase in mobile browsing.
9: Competition benefits
There was a time when there was one of everything in Ireland. One phone company, one health insurer, one electricity provider and one gas company. Then Bord Gáis Energy and Lucy Kennedy came along in 2008 with their Big Switch and everyone started moving providers.
According to a study into consumer behaviour published by Accenture earlier this year, 64 per cent of Irish consumers switched at least one provider in the previous 12 months
10: Mortgage arrears
According to the most recent set of figures from the Central Bank the level of mortgage arrears continues to fall as the economy improves but one problem, which was virtually unheard of a decade ago, has not gone away.
Owner-occupier mortgage accounts classified as being in arrears fell 1.7 per cent to 72,489 in the third quarter – the 17th consecutive quarter of decline. But the figure still represents 10 per cent of all owner-occupier mortgage accounts. By comparison, the figure in the UK is 1.5 per cent.