Lending to Irish households fell again in October, as deposits rose sharply, showing that despite the nascent recovery, Irish consumers are continuing to save, rather than borrow, according to a Central Bank survey.

Lending to consumers fell by 2.5 per cent on an annual basis, as consumers repaid more than they borrowed. During the month, loan repayments exceeded drawdowns by €253 million, as mortgage lending fell by €138 million, down by 2.4 per cent on an annual basis, and loans for other purposes fell by €115 million, down 3 per cent year on year.

While Alan McQuaid, economist with Merrion Capital, noted that an underlying problem is " as much about the lack of demand for credit as it is about the supply of credit", he also said " the real issue is the price of credit".

“Even with record low Eurozone interest rates, small businesses are reporting that the cost of servicing loans here in Ireland has risen quite sharply, which is unsustainable in the long-run. As a result, individuals and firms are now disposing of assets and clearing their borrowings,” he said.

Deposits rose again during the month, up by €3.9 billion to €178 billion, driven by a sharp growth in household deposits.

These rose by €1.1 billion during the month, marking the largest month-on-month increase in this category since December 2008. Deposits grew by 2.6 per cent, on an annual basis, with consumers opting for overnight deposits over their fixed term alternative, with such deposits falling by €5.3 billion in October.