Consumer lending climbing at highest rate since 2008 as deposit growth slows

Consumer lending increased by 7.9 per cent in the 12 months to October, the highest annual growth rate in the measure since October 2008. This came as growth in household deposits hit its lowest rate in five years.

Statistics released by the Central Bank on Thursday show net consumer lending amounted to €912 million in the year to the end of October.

Growth in consumer lending, which has been consistent for the past 22 months, has been driven by term loans, with the Central Bank noting that overdrafts and credit card debt have grown more slowly.

A total of €174 million was loaned to households in October, compared with €231 million in September.

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On an annual basis, household loans (which include securitised loans) increased by 1.6 per cent, up from 1.5 per cent in September.

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Loans for house purchases, including both on-balance sheet and securitised loans, increased by 1.4 per cent in the year to October, up slightly from 1.3 per cent in September.

Loans for other purposes, which includes business loans for sole proprietors and unincorporated partnerships, recorded net repayments of €88 million in October.

Household deposits stood at €153 billion at the end of October, having fallen by €89 million in the month, after increasing by €1.2 billion in the previous two months.

In the year to October, household deposits increased by €4.1 billion, the lowest annual increase in five years. The annual growth rate slowed to 2.8 per cent, from 3.9 per cent in September.

The biggest slowdown in deposit growth was for overnight deposits, which include current accounts and demand deposit accounts, as consumers locked their savings into longer term accounts.

Household saving in overnight deposits fell by €1.1 billion in October, compared to a €17 million increase in September.

Meanwhile agreed maturity deposits, that can’t be withdrawn before a fixed term without penalty, increased by €1.1 billion in October, up from €665 million in September. This continues an upward trend in growth since March 2023.

The Central Bank noted that there was a “significant divergence” between household deposits and consumer lending during the pandemic, as deposit rates grew and lending declined, but that deposit growth has since slowed and consumer credit growth has turned positive.

Net lending to non-financial corporations (NFCs) increased by €187 million in October, reversing a decrease of €128 million in September. In the year to October, NFC lending declined by 2.1 per cent, compared to an annual decrease of 2.4 per cent in September.

Deposits from NFCs stood at €82 billion by the end of October. There was a net inflow of deposits from NFCs of €3.9 billion last month, compared to net withdrawals of €2 billion in September. NFC deposits increased by 3.8 per cent in the year to October.