Private sector lending falls 6%

TOTAL private sector lending fell by 6% last year, nearly half of which was made up of declines in personal loan dealings.

Latest Central Bank private sector credit (PSC) data, published yesterday, showed that personal lending fell by 2.8% last year.Included in this was a €1 billion year-on-year fall in non-mortgage related lending.

Lending to personal sector – including residential mortgages – fell by €1.3bn in the final three months of last year, alone. Exclusively, mortgage lending was down €315m more at the end of the year than it was at the end of the third quarter of last year.

Of the overall 6% lending decline, the Central Bank said two-thirds was directly due to write-downs of existing credit arrangements and increased provisions for bad and “doubtful” debts.

“PSC fell by 4.2% during the fourth quarter of 2009, with credit to the majority of economic sectors [financial intermediaries, property, non-property/non-financial businesses and the personal sector] declining over the quarter,” the Central Bank said.

Alan McQuaid, chief economist at Bloxham Stockbrokers, noted that the amount owed on personal credit cards declined, marginally, in December on a year-on-year basis.

“Total repayments were somewhat lower than new spending in December. However, this was probably due to the Christmas factor rather than the start of a new trend towards increased credit card expenditure,” he said.

He warned that the European Central Bank (ECB) remaining steady on main eurozone interest rates won’t necessarily safeguard mortgage holders here, with the local banks likely to up their individual rates.

“December’s money supply figures for the Eurozone, as a whole, suggest that credit conditions remain very tight – despite the ECB unlimited provision of liquidity to banks. Although the ECB is not expected to raise official interest rates until the latter part of 2010 at the earliest” he added.


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