Virus leads consumer borrowing to crash to 17-year low

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

Total personal loans amounts issued were the lowest in 17 years.

The drop in mortgage and personal loan borrowing was despite a new fall in mortgage rates that mean Ireland now has the third highest rates compared with the rest of the eurozone.

Latest Central Bank figures show personal loan levels fell to just €64m in April – a fall of €119m compared with the previous month.

The shock of the pandemic largely stopped household borrowing, which meant there was 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.

The series was first issued in January 2003.

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

Withdrawal

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.

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.

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

Daragh Cassidy, of price comparison site Bonkers.ie, said the average first-time buyer mortgage in Ireland is around €225,000.

This means a first-time buyer who takes out a mortgage of this size over 30 years is paying on average just over €168 more each month, or €2,000 a year.