Household lending down 3.7% last month

December saw a further annualised drop in household lending levels, with a 3.7% fall noted by the Central Bank.

The figures, published yesterday, also note loans for house purchase — which traditionally make up more than 80% of household loans — declined by 2.7%, year-on-year, in the month. Lending for consumption and other purposes declined by 7.5%.

The Central Bank data also showed household loan repayments exceeded draw-downs by €43m in December, following a net monthly decline of €335m in November. Last month’s figures were driven by a €100m decline in loans for “other purposes”.

Meanwhile, loans for the purposes of consumption and house purchase increased by €45m and €12m respectively, according to the Central Bank.

“Measures that increase the ability of banks to lend are only effective if there is demand for credit that is not being fulfilled, but the problem appears to be as much about the lack of demand for credit as it is about the supply of credit,” says Alan McQuaid, chief economist with Merrion Stockbrokers.

“The new mortgage lending rules from the Central Bank are likely to dampen demand/supply of credit further, suggesting overall bank lending will remain subdued in 2015, and still well below what the economy needs in the long-run.”

“The credit problem is not unique to Ireland, with weakness in lending across the eurozone, which the European Central Bank has tried to address. But the ECB is only one player on the pitch and it requires support from politicians via structural reforms and looser fiscal policy,” he said.