Loans to Irish households declined at a rate of 2.5% year-on-year in October, as against an annual fall of 2.7% in the three previous months, a new report from Merrion Stockbrokers indicates.

Lending for house purchase, which accounted for 83% of total household loans, declined at an annual rate of 2.4%. Lending for consumption and other purposes fell 3.0% year-on-year.

Irish household loan repayments exceeded draw-downs by €253m during October. This followed an increase of €78m in September, which had marked the first increase in this category since December 2014.

Developments in October were predominantly driven by a decline in lending for house purchase of €138m, while loans for consumption and other purposes decreased by €115m during the month.

In the case of loans for house purchase, repayments exceeded draw-downs by almost €1.9bn in the year to end-October, while non-housing loans also saw net repayments of €501m over the same period.

Meanwhile, Irish household deposits rose by €1.1bn in October, marking the largest month-on-month increase in this category since December 2008. Over the twelve months ending October, household deposits increased by €2.4bn or 2.6%. There have been strong inflows into overnight deposits, growing by €7.4bn in the year to October. Conversely, deposits with agreed maturity declined by €5.3bn over the same period.

For the time being the Irish economy continues to prosper despite the weak credit numbers, the report states, but from a long-term perspective a greater level of credit will need to flow into the economy to maintain the positive GDP growth momentum we’ve seen over the last year or so.

However, the fact is that many Irish consumers/households are still burdened with a huge level of outstanding debt from the “Celtic Tiger” era and are in no hurry to add to that load.

Source: www.businessworld.ie