The latest figures from the CSO show that loans to Irish households declined at a rate of 1.8% year-on-year in August, as against an annual fall of 1.9% in July. Adjusted for loan sales and securitisations, there was an annual decrease of 3.1%.
Lending for house purchase which accounted for 83% of total household loans, decreased by €159m. On a year-on-year basis, mortgage loans declined at a rate of 1.9% with households repaying €1.4bn more than was advanced in new loans.
Non-housing loans increased by €41m in August. Growth in credit card spending during the month was predominantly driven by education expenditure. In annual terms, non-housing loans for consumer and other purposes declined by 1.4%
According to Merrion Stockbrokers, "Although encouraging in some aspects, the overall banking data are still a cause for concern. Households and businesses appear to want to pay down out-standing debt which is fine. However, with the cost of funding remaining high, particularly compared with the Eurozone average, there seems to be no real incentive to take on new borrowings, which is a concern as regards boosting economic activity going forward."
They added, "The bottom line is that credit will in our view need to flow at a much stronger level than currently if the Irish economy is to grow to potential over the long-run. But, with possible contagion effects from the problems with Germany’s main bank Deutsche Bank, the short-term risk is that Irish banks batten down the hatches and retrench on the lending front."
Source: www.businessworld.ie