In December 2023, Irish households’ outstanding credit reached €96.2 billion, representing an annual increase of 2.4%. This was primarily due to European Central Bank’s successive interest rate hikes which prompted mortgage holders to substitute tracker rates with extended fixed-interest repayments. Concurrently, household deposits rose 3.2% over the year, reaching a value of €136.9 billion.
Over the September to December 2023 quarter, lending activities saw an adjusted rise of €824 million, and an increase in overall deposits by €83 million. According to the Central Bank’s latest data, total lending for housing purchases experienced a 1.6% growth over the year, leaving homeowners with a whopping €83.7 billion debt by year end.
In a bid to surmount inflation, the European Central Bank escalated its benchmark rate by 4.5 percentage points since summer 2022. This led to a stark fall in the number of Irish households with tracker mortgages as mortgage interest rates skyrocketed. By December 2023, the yearly decrease in tracker-rate home loans stood at 18.1%, down a bit from last June’s peak decline of 20.5%.
Lastly, standard variable rate loans and more predictably, long-term fixed rate loans, witnessed more significant annual increases. Home loans with fixed-rate terms exceeding five years surged 24.6% over the year, while loans with three-to-five-year fixed rates increased by 11.5%. By December’s close, total loans issued to households for main residence purchases rose 2.7% year-on-year, valuing at €80.2 billion.
In the meantime, a decline was witnessed in the value of buy-to-let properties loans (a decrease of 17.4 per cent, amounting to €3.3 billion) and loans for second residences or holiday homes (a decrease of 20.9 per cent, reaching €170 million). There was an increase observed of 8.1 per cent in terms of lending for personal reasons such as investments and other purposes, culminating at a total outstanding balance of €12.5 billion for the year concluding in December 2023. The household loans and deposits referred to in the figures provided by the Central Bank pertain to those maintained by financial establishments within the country, comprising banks, credit unions, and building societies.