Economics: Loans to Irish households up 0.3% in the year to October

New figures from the Central Bank yesterday showed that loans to Irish households rose at a rate of 0.3% year-on-year in October compared with annual increases of 0.5% in September and 0.2% in August. Adjusted for loan sales and securitisations, there was an annual fall of 1.6%.

Lending for house purchase, which accounted for 83% of total household loans, decreased in net terms by €25m in the month. On a year-on-year basis, net mortgage lending fell by €83m or 0.1%. Non-housing loans increased by 2.5% in year-on-year terms to end-October, marking twelve consecutive months of annual growth. Drawdowns on loans for consumption exceeded repayments by €575m in the year. In October, €61m more was repaid than was drawn down. Loans for other purposes recorded a negative net flow of €9m in October, with repayments over the 12 months to the end of the month exceeding drawdowns by €200m.

Meanwhile, deposits from households decreased by €276m in net terms during October. In annual terms, household deposit lodgements were €2.7bn higher than withdrawals, growing by 2.7% over the year. This was driven by growth in overnight deposits offsetting continued declines in term deposits. Household deposits stood at €100.4bn at the close of October.

The latest set of credit figures were again a mixed bag, with some good and bad features. But notwithstanding the caveats relating to the credit gap indicators at this time, they are still suggestive of a weak overall credit environment in Ireland. The bottom line is that credit will need to flow at a much stronger level than currently if the economy is to grow to its full potential over the long-run.

Alan McQuaid (01/12/17)
Economist