Crisis looms as Irish debt approaches 'unsustainable' level

Total debt levels in Ireland are on course to reach €300bn by the end of next month, according to figures published today by the Central Bank.

The startling rise in private borrowing has prompted a warning from consumer campaigners that a crisis is now looming.

Banks and other finance houses lent out €4.7bn last month alone, according to the latest Central Bank and Financial Services Authority report.

The amount represents a 1.6% rise in borrowings on June and brings total private credit to €293.4bn.

If trends continue as they have all year, with an average of €4.9bn being borrowed every month, then outstanding debt will be in excess of a record €300bn within weeks.

The Consumers Association issued a stark alert that the situation was now unsustainable and something was going to have to give.

“It’s a phenomenal amount of debt,” said chief executive Dermott Jewell. “There’s no doubt the drivers of this are the outrageous prices of property and the cost of rents.”

An extra €2.4bn was paid out in mortgage lendings last month – the highest monthly hike this year so far – bringing the total money owed on homes to €113.2bn.

“Consumers are having to borrow to pay for other things, and increasingly they are borrowing to buy basic things – and if that is the case, then there really, really is a crisis looming,” said Mr Jewell.

“If you speak to debt campaigners, they will tell you it is people who are holding down a job, struggling, who are affected and if they can’t afford to make their repayments then we are facing a problem. It will have to stop at some stage.”

He warned imminent price hikes over the coming months on essentials like fuel and health care would provide the real litmus test on whether debts could remain manageable.

“At a home level, if repayments become too much of a burden and additional borrowing is needed just to buy basic, non-competitive requirements, then there has to be some give somewhere,” he said.

“The problems are beginning to show and are becoming real. The amount of repossessions in cars is beginning to grow. The finance houses are having to repossess quite a number.

“It is interesting to note that in the newspaper today there is an advertisement from one of the major credit card companies for people to help collect outstanding debt,” he said.

According to the Central Bank report, credit card users owed €2.4bn on their bills last month. That was unchanged from the month before, with new spending matching payments.

The annual growth rate in credit card debt dropped from 18% in June to 17.1% in July. However, changes are seasonal and the decrease is normal for this time of year.