Households continued to save money and pay down debt in January, according to the latest figures from the Central Bank.

It continues a trend that started with the introduction of the first wave of restrictions in March of last year to curb the spread of Covid-19.

Households, that hadn't suffered a loss of income, collectively put record amounts of cash into deposit accounts throughout the course of 2020, a trend that continued into January.

Deposits increased by €1.9 billion in net terms to reach yet another historic high of €126.4 billion by the end of the month.

In annual terms, household deposits recorded a net inflow of €15.1 billion, or 13.5%.

Paying down debt

Loan repayments exceeded new loan drawdowns by €205 million in net terms in the month, meaning consumers are paying down debt collectively at a faster pace than they're taking out new loans.

Loans for house purchase decreased by €111 million in net terms in January.

Consumer lending decreased in net terms by €205 million over the month.

In annual terms, repayments exceeded new lending by €747 million - or around 6%.

That represents the most pronounced negative annual growth rate since December 2014.

Negative rates

Overnight deposits - which refers to money lodged in accounts that can be readily accessed without a notice period - were the main driver of the monthly and annual increase in deposits.

Households have been depositing record amounts of money in banks and credit unions, despite the availability of negligible - or zero - returns.

Banks have been charged for parking overnight deposits in the European Central Bank for the past seven years.

They've so far held off from passing that charge onto personal savings accounts, although they have been levying negative rates on large deposits from corporate and institutional customers.

There is a growing expectation that banks will start levying negative interest rates on large deposits from regular retail customers, particularly in light of the decision by Ulster Bank to withdraw from the Irish market in the coming years.

Ulster Bank has in excess of €20 million in deposits which will have to find a new home in the years ahead.

While banks are keen to take over Ulster Bank's loan books, they're not so keen on taking on their deposits.