Irish consumers are shunning debt and avoiding credit cards in favour of putting their money on deposit, new figures from the Central Bank show.
According to the regulator's second Consumer Protection Outlook publication, inflows into deposits was the largest since 2008, while the number of credit cards fell by 16 per cent. And, lured by lower fixed rates, homeowners are increasingly switching from variable to fixed rate mortgages, with about 1 in 2 of all outstanding mortgages of the latter variety.
Deposits
Irish consumers are still plunging their money into deposits, despite the difficulty in getting a return of more than 1 per cent, the figures show.
Indeed while household credit continued to decline, household deposits increased by € 2.5 billion, or by 2.8 per cent, during 2015, marking the largest annual inflow since end-2008.
Credit cards
The number of credit card accounts plummeted by almost 16 per cent since the second half of 2013, with the amount outstanding on such cards also declining, down by 17 per cent in value. Arrears also decreasing, down by 33 per cent from 2014-2015. However, the figures show that there was a slight increase in the number of credit card accounts in arrears from the first half of 2015 to the second half.
Mortgages
Owner occupier mortgages grew by €78 million during the fourth quarter, the first net increase since the flow series began in Q1 2011. However, despite this, overall mortgage lending fell by €430 million during the fourth quarter, driven by net repayments on buy-to-let mortgages. This means that growth remained negative at minus 2.6 per cent; the lowest rate of decline since Q3 2011.
Loans fixed for up to three years were main driver of flows, growing by €1.8 billion during 2015, and accounting for about 50 per cent of total outstanding owner occupier mortgages. Floating-rate loans (both investment and owner occupier), recorded a significant decrease of € 4.3 billion during 2015.
As the Central Bank noted in its report, “These developments are reflective of the current interest rate environment where fixed-rate mortgages have increasingly favourable rates”.
Investment mortgages slumped by 9.6 per cent in the year to end-2015, with some €1.6 billion repaid during the year.
The figures also show that a “significant” level of arrears remains, with 12 per cent of mortgage loans for private dwelling in arrears of over 90 days at end-Q4 2015 . Investment mortgages had a higher level of arrears over 90 days, at 24 per cent.
