Central Bank predicts higher demand for loans

Loan demand for all aspects of household credit is expected to increase during the first quarter of this year.

In its latest bank lending survey, the Central Bank added that the first three months of 2013 are also likely to see less stringent lending criteria as banks continue to ease their credit standards for borrowers.

The latest survey — which collates the Irish responses from a eurozone-wide banking trend study — found that the fourth quarter of 2012 saw an increase in mortgage demand, while customers’ demand for general lending was unchanged for the fourth consecutive quarter.

Although the actual rate of increase in mortgage demand slowed during the final three months of 2012, the Central Bank noted that the period represented the third consecutive quarter of rising demand for mortgages amongst Irish consumers.

Elsewhere, however, the bank lending survey noted no change in both loan demand or credit standards in relation to business loans.

“Most of the factors impacting credit standards that banks were asked to evaluate were unchanged, although industry and firm-specific factors provided some impulse towards tighter credit standards,” the Central Bank said.

The wider European Central Bank lending survey noted a “pronounced net decline” in business loan demand in the last quarter of 2012, noting that companies weren’t seeing a need to finance new fixed investment such as buildings and machinery.

The survey was welcomed by PIBA — one of the country’s largest insurance and mortgage industry representatives — but it added that the easing of credit standards on loans is still only “scratching the surface” and isn’t going far enough to meet demand.

“The lending situation is still in crisis territory. The pendulum swung from lending with almost complete abandon to a virtual freeze on lending. We need to see it swing back in the direction of prudent lending,” said PIBA chief operations officer, Rachel Doyle.

She said it was disappointing that credit standards were unchanged for lending to enterprises: “We would like to see the Central Bank putting more pressure on banks to improve lending.”