Level of lending falls another €2.3bn
The continued fall was led by a further drop in residential mortgage lending, which was down by €162 million in October – the seventh consecutive month in which mortgage lending has fallen.
“All in all, it is hard to see demand for credit picking up until consumers feel comfortable that unemployment has peaked and employers are hiring again. However, it’s a Catch-22 situation, as the availability of credit will be critical if labour market conditions are to improve. In the meantime, the year-on-year rates of change in demand for overall private-sector credit and residential mortgages are likely to turn more negative,” commented Alan McQuaid, senior economist at Bloxham Stockbrokers.
“Survey evidence from the main credit providers suggests both reduced demand for credit and continued tightening of credit standards by lenders are still impacting on credit developments,” he added.
According to the Central Bank figures, credit fell by 3.7% – or by €13.5bn, in monetary terms – in October, on a year-on-year basis. This, the bank said, was mainly (as much as 90%) as a result of valuation effects (increases in bad debt provisions, the write-down of loans and exchange rate pressures for the euro).
“The balance, which is marginal in overall terms, reflects a decline in the underlying stock of credit on a year-to-year basis in October. Non-mortgage credit, which also excludes lending to non-bank IFSC companies, was unchanged,” yesterday’s statement added.
It said that non-housing related household credit/lending was down by 18% compared to the same month last year. Credit card debt levels declined slightly in the month.
Meanwhile, the Professional Insurance Brokers Association (PIBA) has called on the Financial Regulator to act on a previous request by the Financial Services Ombudsman to investigate the policies of all mortgage lenders to ensure they’re honouring agreements with tracker mortgage holders.
“Lenders would prefer if they didn’t have any customers on tracker rates but practices by lenders encouraging borrowers off tracker rates and onto less competitive rates could significantly impact these consumers later,” said PIBA director Rachel Doyle.
