Business Irish

Wednesday 21 August 2019

Households borrow less as they focus on repaying mortgage debt

Households are borrowing less as they focus on repaying mortgage debt
Households are borrowing less as they focus on repaying mortgage debt

Colm Kelpie

HOUSEHOLDS are borrowing less as they focus on paying off mortgages and other debt.

Loans to households fell across the board during November, data from the Central Bank shows.

Homeowners continued the trend seen throughout the year of prioritising paying down debt as loan repayments exceeded draw-downs by €335m during the month.

Property prices have fallen back marginally in Dublin, but rose at the strongest rate in seven years outside the capital.

Residential property values outside Dublin are now almost 10pc higher when compared with a year ago.

But the data from the Central Bank backs up arguments that the property price surge experienced in Dublin has nothing to do with credit.

In the case of mortgages, the Central Bank figures show that repayments have exceeded new borrowing by €2.2bn for the year to date.

And it's not just mortgages.

Repayments have also exceeded borrowing by €1.6bn for non-housing loans in the year to the end of November.

Lending to households continued to fall on an annual basis, reducing by 3.8pc during the month.

Mortgages, which account for 81pc of total household loans, declined at an annual rate of 2.9pc. The value of mortgages given out in the month dropped by €156m.

Lending for consumption and other purposes declined by 7.1pc year-on-year.

The data comes just a day after separate statistics showed that lending to companies in Ireland shrank faster than anywhere else in the eurozone.

Corporate lending fell 11.4pc in Ireland in November compared to the same month last year. That compares with 8.5pc in Spain, 6.5pc in Portugal and 3.2pc in Greece.

While the news was particularly bad for companies here, the picture was gloomy almost everywhere with lending to companies and households falling across the zone.

The declines added to concerns that the European Central Bank's latest round of stimulus may not be enough to revive the currency bloc's economy.

ECB data published on Tuesday showed that loans to the private sector across the eurozone contracted by an average of 0.9pc compared with November 2013, after a contraction of 1.1pc in October.

Last month, it was revealed that Bank of Ireland was to pay €253m in cash to buy a 'book' of Irish home loans from IBRC's special liquidators.

It is understood Bank of Ireland was paying more than the "face value" of the loans to buy the mortgages.

That reflected the fact that the 5,000 or so customer accounts involved are fully performing - this means that they are keeping up to date with their repayments.

To win the bidding for the loan book, Bank of Ireland saw off competition from groups understood to include AIB and new financial services company Dilosk.

At the time, industry sources said the bidding reflected banks' relative inability to grow lending organically.

Meanwhile, yesterday's Central Bank data also showed that household deposits dropped by €731m in November - although, because it was in the run up to Christmas, officials in Dame Street speculated that this may be explained by seasonal factors.

Over the year to date, household deposits increased by €283m.

"There have been strong inflows into overnight deposits, growing by €4.5bn over the year to the end of November, while agreed-maturity deposits fell by €4.1bn," the Central Bank said in its latest money and banking statistics release.

On an annual basis, household deposits grew by 0.3pc, with overnight deposits growing by 9.6pc.

Irish Independent

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