Credit card debt fell by a record amount last month, as consumers used their matured Special Savings Incentive Accounts (SSIAs) to pay off their outstanding bills.
Figures from the Central Bank show that the level of payments received by credit card companies jumped by €217 million between April and May to their highest level - €1.3 billion.
Payments on personal credit cards surged almost 23 per cent in May, while payments on business credit cards fell. The Central Bank said this suggested that SSIAs were "the major factor" behind the spike in payments, which in turn led to the largest ever fall in the level of outstanding indebtedness.
Credit card debts, including balances that may be paid in full by the payment due date, stood at €2.67 billion at the end of May. This is the lowest amount of outstanding credit card debt since November last year, suggesting that SSIAs have effectively wiped out the extra card debts consumers built up over the Christmas period and in the first four months of 2007.
Around €6 billion in savings matured from the last batch of SSIAs at the end of April. The rise in credit card payments last month is equivalent to almost 4 per cent of this money.
The payments resulted in an extremely sharp fall in the annual rate of outstanding indebtedness on credit cards, with the growth rate dropping from 17.1 per cent to 11.5 per cent in one month.
Overall, the increase in private sector credit in May was the highest month-on-month rise so far this year. But the €5.6 billion increase in borrowings over the month was €1 billion lower than the credit advanced in the same month last year.
As a result, the annual rate of credit growth moved further along its downward trend, falling from 22.2 per cent in April to 20.9 per cent in May. This is the slowest rate of growth in credit since February 2004.
Despite falling house prices, higher interest rates and reports of a cooling property market, there was a net increase of €1.5 billion in residential mortgages last month. But the increase in mortgage lending was €600 million lower than that recorded in May last year and therefore was not enough to halt the ongoing decline in the residential mortgage market, which had been exacerbated by uncertainty about the future of stamp duty in the run-up to the election.
Mortgage credit is now growing at a rate of 20 per cent - its slowest rate of growth in almost five years. The rate of growth recorded in April was 21 per cent.
The total amount owed on residential mortgages in May 2007 stood at €130.2 billion, while the overall credit advanced to non-Government Irish residents stood at €337.4 billion.
On the deposit side, overnight deposits rose by €4.3 billion. Money held in deposit accounts that can be redeemed at up to three months' notice rose by €279 million, while deposits with an agreed maturity of up to two years increased by €639 million.
