Lending collapses as consumers tighten budgets – Independent.ie

MORTGAGE and personal borrowing collapsed in April as consumers reacted to the spread of the virus by tightening their budgets.

his was despite a new fall in mortgage rates that mean Ireland now has the third highest rates compared with the rest of the Eurozone.

The latest Central Bank figures show that was a massive drop in lending in April.

New mortgage loans fell by 40pc in the month to €407m.

Some banks have been withdrawing mortgage loan offers after people temporarily lost their jobs.

This is despite them getting mortgage approval in principal from a bank prior to the Covid-19 crisis.

And consumer loan levels fell to just €64m in April. There was a fall of €119m in April compared with the previous month.

The shock of the pandemic stopped household borrowing, leading to a 65pc decrease in consumer lending volumes compared with the same month in 2019.

“This is the lowest level of new consumer loan agreements since the series began, after declining by €119m compared to the previous month,” the Central Bank said.

Statisticians said the rates charged on new mortgages fell again in April.

This country had been the most expensive for new mortgages until recently, but now Latvia and Greece are more expensive.

High mortgage rates in this State compared with the costs in the likes of Germany and France have been hugely controversial, especially as banks have been bailed out by taxpayers.

But the demand by regulators that banks here set aside more capital when issuing a mortgage than in the rest of the currency bloc, and the long delay in repossessing properties when no repayments are made means banks have been slow to reduce rates.

Despite that, rates have been falling for months now.

Deputy Central Bank Governor Ed Sibley recently accused banks here of hitting many mortgage holders with double the interest rate they need to be profitable.

Now Central Bank statisticians say the average rate on a new mortgage was 2.78pc in April, a slight fall on what was charged in the previous month.

However, this is still more than double the average in the Eurozone of 1.29pc.

“Ireland had the third highest mortgage interest rates across the euro area in April,” the Central Bank said.

The average new fixed rate in this country is now 2.7pc, a marginal fall on the March rate.

However, there has been a rise in the new variable rates charged to 3.12pc in April. Few new mortgages are taken out with variable rates, the Central Bank said.

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