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Loans to households down 4pc in year

Friday, February 28 12:28:50

Loans to households declined at a rate of 4.1pc year-on-year in January, the same annual fall as in December, latest figures show.

Lending for house purchase, which account for 78pc of total household loans, declined at an annual rate of 3.0pc. Lending for consumption and other purposes fell by 7.6pc over the same period.

Household loan repayments exceeded draw-downs by E856m during January, following a net monthly decrease of E143m in December. Developments last month reflected the decline across all categories of household loans, with the most substantial decrease seen in loans for house purchase, which fell by E416m.

Meanwhile, the annual rate of change in Irish private-sector deposits remained positive in January. Private-sector deposits rose by 6.9pc over the year following annual rises of 8.4pc and 8.5pc in December and November respectively.

There was a monthly decrease of E623m in Irish resident private-sector deposits during January. This was mainly due to a fall in deposits from other financial intermediaries of E652m. Non-financial corporate deposits also declined, by E470m over the month. Against that, household and insurance corporations and pension funds showed increases of E397m and E101m respectively in the opening month of 2014. Excluding the impact of the IBRC liquidation transaction in March 2013, other financial intermediaries' deposits would have fallen 5.5pc on an annual basis in January and total private-sector deposits would have been down 0.7pc over the year.

Credit institutions' borrowings from the Irish central bank as part of the Eurosystem monetary policy operations fell by E1.9bn in January, leaving the outstanding stock of these borrowings at E37.1bn. The domestic market group of credit institutions accounted for E29.8bn of this total outstanding stock and current levels represent the lowest level of reliance on central bank funding since August 2008.

According to Alan McQuaid of Merrion Economics, the credit data remain the most disappointing as regards Ireland's recovery story.

"Although there has been some improvement in recent months in terms of bank lending, progress is still very slow. Advancing credit to the SME sector in particular is essential if the Irish economy and labour market is to fully recover. But even lending to the household sector leaves a lot to be desired. Unless this situation is addressed, Irish GDP growth over the next few years will remain well below its potential," he said.