We are borrowing €50m a month for holidays and cars

Households are borrowing €50m a month to buy big-ticket consumer items like cars, home improvements and holidays.

File photo.
File photo.

However, this still falls short of a spending splurge say experts.

“April 2017 recorded net lending of €161m in consumer loans, which was the largest monthly net increase since early 2011,” a Central Bank spokesman said last night.

And net lending to Irish households for consumer spending has increased by €50m a month, on average, over the last 12 months. These are part of the Money and Banking Statistics for May 2017 released by the Central Bank yesterday.

“Consumer loans advanced by Irish banks exceeded repayments by €162m in the three months to end-May 2017, continuing a trend evident since early-2016,” the Central Bank said yesterday.

“These types of loans typically include car loans, furniture, domestic appliance and holiday loans; with overdrafts and credit cards also included.”

The statistics also showed that consumers are also returning to credit card usage after a dramatic fall in usage during the recession.

Credit card debt now accounts for about 20% of outstanding consumer bank credit, which stood at €12.4bn in May

However, while new borrowings are increasing by around €50m a month, experts say there is no fear that householders are losing the run of themselves.

The KBC Bank Ireland and ESRI Consumer Sentiment Index published last month shows that Irish consumer sentiment weakened slightly in May 2017.

The index fell marginally from 102 in April to 100.5 in May but that drop was sufficient to bring the index to its lowest level since December 2016.

“While Irish economic conditions are improving, this is not translating into broadly based and palpable gains in consumers’ financial circumstances,” the KBC/ESRI report read.

“In turn, this means that sentiment and household spending lack a feel-good factor that would encourage sharper increases in these areas.”

However, the Consumers’ Association of Ireland (CAI)’s policy and council adviser, Dermott Jewell, told the Irish Examiner that there is a “degree of positivity” in the Central Bank’s statistics.

“It does show a much stronger degree of positivity and a confidence in borrowing,” said Mr Jewell.

“Two reasons are employment and the confidence behind employment for a number of years now.”

“There is also an increasingly ageing population that has just retired and they’re coming into ownership of their properties and are trying to improve them,” he said.

The CAI adviser said banks’ stress tests are now as risk-averse as possible.

“The stress tests are very focused on the ability to pay back a loan,” said Mr Jewell.

“Banks and credit unions are happy to lend where it can be paid back but every lender is so afraid of having a non-performing loan that they eliminate every risk they can.”

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