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Central Bank makes number-crunching a bit easier to understand

Banks are the dominant player in borrowing but non-banks are big for businesses and credit unions are most popular for personal loans

Credit unions are the biggest source of credit for people seeking personal loans. Photograph: Thomas Trutschel/Photothek via Getty Images
Credit unions are the biggest source of credit for people seeking personal loans. Photograph: Thomas Trutschel/Photothek via Getty Images
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Cantillon
Tue Dec 10 2024 - 05:00

The Central Bank of Ireland is breaking new frontiers in an initiative to try to make stuffy financial statistics more accessible to the public while providing “meaningful insight” in what it says aims to be a visual but concise manner.

First up in the series is data of the amount of money borrowed by Irish households and business, and from whom.

For borrowings, the Central Bank turned to the Central Credit Register, a database it now runs on which details of any credit in excess of €500 must be recorded by the lender. It gives a broader picture than the more traditional Central Bank credit and banking stats which rely on information from the State’s banks and credit unions.

So what’s the bottom line?

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In June, Irish households and businesses had borrowings of €219.1 billion That translates as average debt per capita is €25,414.

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The bulk of that is accounted for by personal borrowing within which the banks remain the dominant lender and mortgage loans the most significant element of individual borrowing.

More than three-quarters of all borrowing by individuals is for a mortgage for the family home. When you add in buy-to-let mortgages, the number rises to 85.2 per cent.

After that comes personal loans that are repaid by instalment where, perhaps surprisingly, credit unions are the biggest player, with of the business.

The balance of lending is made up of areas such as hire purchase, personal contract plans used widely in the motor finance sector and credit card debt but these each only account for between 1.4 and 2.4 per cent of total borrowing.

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While banks remain the dominant source of credit, providing 63 per cent of all finance, nonbank lenders – including the fintechs like Revolut, mortgage lenders like Avant and companies like Pepper Finance – account for a chunky €60 billion of the money borrowed or about 28 per cent.

Credit unions are the source for just 3 per cent of credit – about €7.5 billion. The vast majority of this is in personal instalment loans where its €6.68 billion exposure accounts for 57.4 per cent of all lending in this category. In home mortgage loans, where credit unions are keen to play a bigger role, they currently account for just more than half of 1 per cent of borrowing – at €670 million.

When it comes to business loans, things are slightly different. While nonbank lenders provide about one-fifth of credit for personal borrowers, that numbers jumps to almost 35 per cent in the corporate lending market and about 53 per cent on loans to individuals for business.

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