The economy may be returning to growth, but Irish households remain either reluctant - or unable - to borrow, new figures from the Central Bank show, as lending to Irish households declined by an annual rate of 2.6 per cent in June. And, the figures show that low interest rates for fixed term deposits mean that Irish households are increasingly favouring instant access accounts.

Lending

In June, household loan repayments exceeded drawdowns by € 163 m , following a decline of € 291 million in May. According to the Central Bank, this decline was mainly driven by a decline in mortgages of 2.6 per cent (€89m), personal loans of 3.8 per cent (€38m) and other loans (4.4 per cent - €37m).

This means that on an annual basis, loans to Irish households decreased by 2.9 per cent in June 2015. Alan McQuaid, economist with Merrion Stockbrokers, says the decline in lending seems to be “as much about the lack of demand for credit as it is about the supply of credit”, with many Irish consumers/households still burdened with a huge level of outstanding debt from the “Celtic Tiger” era.

However he added that from a long-term perspective, “a greater level of credit will need to flow into the economy to maintain the positive momentum we’ve seen over the last year or so”.

Deposits

Household deposits also fell, down by €198m in June, although are up by 1.5 per cent on an annual basis. The decline in June was mainly driven by a fall in term deposits of €378m, as Irish households increasingly turn away from fixed deposits in favour of overnight or instant access accounts. Indeed overnight deposits increased by €214m in June, or by 12.3 per cent on annual basis.