Households have saved an extra €10bn this year alone
CONSUMERS have put an extra €10bn into banks and credit unions savings accounts this year alone.
New figures from the Central Bank show that households now have €120bn on deposit.
The surge in savings has been prompted by people putting off major purchases due to the pandemic and hoarding more money over fears the economy will fall into recession in the coming months.
The amount of money on deposit in banks and credit unions rose by €2bn alone in July.
Experts said the €120bn in savings accounts was a record high.
Banking sector private sector deposits now exceed loans by €76bn.
Most of the spare funds that banks and credit unions are taking in are being lodged with the Central Bank as there is weak demand for borrowing.
The number approved for a mortgage in July was 30pc lower than in the same month last year, while demand for personal loans and car finance are also down.
The surfeit of deposits and relative lack of lending had prompted banks to start charging pension funds, corporates and credit unions negative interest rates for keeping cash on deposit.
And there are fears that banks will soon start imposing negative interest rates on consumers with large deposits.
Since the start of July Ulster Bank began charging negative interest rates on savings over €1m held by business customers, credit unions and other institutional clients.
The bank said it is passing on a cost it in turn is charged to keep money with the European Central Bank.
It has been ringing small firms in the past few days warning them about the negative interest rate.
The bank is charging minus 0.55pc for funds held in excess of €1m.
Financial expert Karl Deeter said this would punish a business with more than 80 staff as it would need to keep funds in the bank to cover salaries, regulatory requirements and for emergencies.
“This is just punishing businesses trying to survive in a Covid-19 environment,” he said.
Most people say they have pulled back on big purchases such as cars because of the pandemic.
Some eight out of 10 people say they have been forced to cancel or postpone a life event such as a wedding or major holiday, due to the impact of the coronavirus outbreak, according to 1,000 Irish people in a global survey commissioned by mobile bank N26.
And some households have made savings on working from home, with lower childcare costs and savings on commuting. Savings are also been made from the shut-down of wet pubs.
Much of the money shaved off household budgets is finding its way into bank savings accounts, experts said.