Households continue to pay down debt at faster rate than new lendingFriday 29 August 2014 16.38
Households continued to pay down debt during July, according to figures from the Central Bank, with loan repayments exceeding drawdowns by €437m during the month.
The fall was driven mainly by a €255m drop in loans for home purchases, which were down 3.1% annually.
Loans for home purchases account for 80% of all lending to households, according to the Central Bank.
Overall lending to households was 3.9% lower year-on-year by the end of July.
Meanwhile, repayments by non-financial corporations during July also exceeded drawdowns by €880m.
This compares to a decline of €1.6bn in the previous month, with most of the fall-off coming from loans with a duration of one year or less.
Alan McQuaid, chief economist with Merrion, said the credit data continues to stand out as the most disappointing aspect of the country's recovery.
"While there has been some improvement in the past few months in terms of bank lending, progress continues to be slow. Advancing credit to the SME sector in particular is essential if the economy and labour market is to fully recover," he said.
Lending to households also left a lot to be desired, he added, noting that it was still down 4% on an annual basis.
"The financial institutions maintain that this is a demand rather than supply issue and are open for business. If that is indeed the case then one would expect an improvement in the credit figures in the coming months as the economic data in general get better," Mr McQuaid said.
Without significant credit flow into the economy, he concluded, Ireland will be unable to reach its full growth potential over the next few years.