The latest CSO figures show that loans to Irish households declined at a rate of 3.0% year-on-year in April, as against 3.2% in the three previous months. Lending for house purchase, which accounts for 82% of total household loans, declined at an annual rate of 2.6% last month.
Merrion Stockbrokers believe that last year’s strong GDP numbers and the forecasts for this year would suggest that the private-sector credit figures don’t matter too much, but from a long-term perspective a greater level of credit will need to flow into the economy to maintain the positive momentum we’ve seen over the last year or so.
They allude to the fact that many Irish consumers/households are still burdened with a huge level of outstanding debt from the “Celtic Tiger” era.
According to Merrion Stockbrokers, "The underlying problem at the moment appears to be as much about the lack of demand for credit as it is about the supply of credit, but hopefully this should pick up as the economy continues to regain momentum.
Mortgage approvals data are on the rise but the stricter lending rules from the Central Bank as regards house purchases will likely have a negative impact on borrowing. And even with a pick-up in activity, overall bank lending is forecast to remain fairly subdued in 2015, and still well below what the economy needs for sustainable growth in the long-run."
Source: www.businessworld.ie