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Irish aversion to debt is "most disappointing" aspect of recovery

Loan repayments were €437 million higher than new lending last month.

Image: /Photocall Ireland

THE ECONOMIC NEWS may be positive at the moment, but Irish people are still more focused on paying down debt than borrowing to finance new purchases.

Loan repayments exceeded draw downs by €437 million during July, up from €104 million the previous month.

When compared to last year, lending is lower by 3.9%. Loans for house purchase, which account for around 80% of total lending, fell by 3.1%.

Economists said that the low rate of new lending was the “most disappointing” aspect of Ireland’s recovery story.

Alan McQuaid of Merrion Stockbrokers said “although there has been some improvement in recent months in terms of bank lending, progress continues to be very slow. Advancing credit to the SME sector in particular is essential if the Irish economy and labour market is to fully recover”.

Lending The rate of lending to Irish households Source: Central Bank

Characterising the lending as “very weak overall”, McQuaid said that the main Irish banks are characterising the moribund level of borrowing as a demand rather than supply issue.

“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.”

Read: Should a special scheme to help first-time buyers be introduced?>

Read: Ireland needs more banks, says ESRI>

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Jack Horgan-Jones

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