Irish households drew down more in new loans than was repaid in the three months to the end of July, leading to the highest annual growth in lending since early 2009.

New figures from the Central Bank show €98 million more was drawn down than was paid back with new lending greater than repayments for medium-term loans, which typically cover car purchases, furniture and holidays, only.

Repayments by short and long-terms borrowers continued to outpace new lending activity, the bank said.

Loans to Irish households declined at a rate of 1.9 per cent year-on-year in July, as against an annual fall of 2.1 per cent a month earlier. Adjusted for loan sales and securitisations, there was an annual decrease of 3.2 per cent.

The data show mortgage loans, which account for 83 per cent of onbalance sheet household loans, decreased by €103 million last month. On an annual basis, mortgage loans fell at a rate of 1.9 per cent with households repaying €1.5 billion more than was advanced in new lending.

Non-housing loans for consumer and other purposes were down 2 per cent over the last year while deposits from households rose 2.8 per cent, increasing by €559 million in July alone.

Households

The latest figures show households were net funders of the Irish banking system for the 13th consecutive month. Banks now hold €7.4 billion more household deposits than loans, as against early 2009 when loans exceeded deposits by €53.5 billion.

“Although encouraging in some aspects, the overall banking data are still a cause for concern,” said Alan McQuaid, chief economist at Merrion Capital.

“ Households and businesses appear to want to pay down outstanding debt, which is fine. However, with the cost of funding remaining high, particularly compared with the euro-zone average, there seems to be no real incentive to take on new borrowings, which is a concern as regards boosting economic activity going forward,” he added.