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| Source: Central Bank and Financial Services Authority of Ireland |
The Central Bank said today that after an upturn in March, the annual rate of increase in Irish private-sector credit reverted to trend by declining in April, to 15.9 per cent. The annual increase in non-mortgage credit fell to 19.3 per cent and the residential mortgage growth rate continued to decline, to 11.4 per cent in April, the lowest annual rate since 1992.
The Bank said that a monthly increase of just under €2 billion in private-sector credit (PSC)1 brought the average monthly change in 2008 to date to €2.4 billion, compared with €3.5 billion during the first four months of 2007. The annual rate of increase declined to 15.9 per cent in April,2 after rising in March for the first time in eight months. Although the annual rate of increase in private-sector credit (PSC) increased in March, the three-month moving average growth rate shows that the overall trend is one of decline. The moving average peaked in June 2006 at 29.9 per cent. However, in general, it has fallen each month since then, and reached 16.2 per cent by April 2008.
THe Central Bank said that a fall in lending to other financial institutions in April resulted in a decline of the overall growth rate of non-mortgage credit to 19.3 per cent, after recording an increase in March when it rose to 20.8 per cent. (A sectoral breakdown of PSC for March 2008 is now available on the Bank’s website). Outstanding indebtedness on credit cards increased year-on-year by 7.2 per cent in April, down from 8.6 per cent in March. While the annual rate of increase fell in April, the month-on-month increase in outstanding indebtedness of 2.1 per cent was, nevertheless, the second highest in 12 months after December (which traditionally records the highest month-on-month increase).
The net monthly change in residential mortgages (inclusive of securitised mortgages) remained above €1 billion in April for the second consecutive month, bringing total outstanding residential mortgages to €143.4 billion. The increase in residential mortgages in April is usually below the yearly average, but this may not apply in 2008, due to Easter falling in March. The annual growth rate in residential mortgages was 11.4 per cent in April, compared with 11.6 per cent in March. The April growth rate was the lowest annual rate of increase since May 1992.3
Market interest rates rose across all terms in April, although increases were more pronounced for longer periods. The 12-month rate rose by 23 basis points, while the 3-month rate rose by 13 basis points. The spread between the 1-month and 12-month rates rose to 57 basis points by the end of the month, from 37 basis points at end-March. The rise in the spread mainly reflected increases in market expectations regarding the future path of key ECB interest rates.
Funds provided by the Bank as part of the ECB’s monetary policy operations increased by €4.2 billion in April, with longer-term refinancing operations rising by €3 billion, and main refinancing operations rising by €1.2 billion. While the euro reached a lifetime high against both the dollar and sterling during April, by the end of the month it was 1.7 per cent and 0.7 per cent lower than end-March levels, respectively. The euro was 3.3 per cent higher against the Japanese yen in April. Exchange-rate movements resulted in a 1.2 per cent
increase in Ireland's average nominal harmonised competitiveness indicator (HCI)4 from 113.9 in March, to 115.3 in April.
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| Source: Central Bank and Financial Services Authority of Ireland |
Private-Sector Credit
Total lending by credit institutions in Ireland to non-Government Irish residents increased by €1.9 billion, or 0.5 per cent, in April to €386.3 billion. All of the increase was in eurodenominated lending; non-euro lending fell by €213 million. Lending to non-bank IFSC
companies increased by €1 billion over the month.
Components of Private-Sector Credit
The changes in the main PSC loan categories on credit institutions’ balance sheets in April were as follows:
- Term/revolving loans were €1.3 billion higher;
- Residential mortgages (unadjusted for securitised mortgages) rose by €963 million;
- Other mortgages increased by €14 million;
- Loans up to and including one year rose by €1.3 billion; and
- Overdrafts fell by €274 million.
1 The money and credit statistics are provided by all of the credit institutions authorised to carry on banking business in the State under Irish legislation as well as credit institutions authorised in other Member States of the EU operating in Ireland on a branch basis. Credit institutions authorised in other EU Member States operating in Ireland on a cross-border basis, i.e., with no physical presence in the State, are not included in the statistics.
2 Adjusted rate i.e. excluding lending to non-Monetary Financial Institutions (MFI) IFSC entities, which are not associated with the domestic economy, and adjusted for valuation effects caused by exchange-rate movements.
3 The weighted average growth rates of mortgage and non-mortgage credit do not equate to the PSC growth rate because securitisations are included in calculating the adjusted growth rate for residential mortgages, but are not included in PSC.
4 A decrease in the indicator points to an improvement in price competitiveness, while an increase points to a disimprovement. For background, see Box B in the ‘Domestic Prices, Costs and Competitiveness’ chapter of the Bank’s Quarterly Bulletin, No. 2 2007.
