Growth in credit card debt eases

By Brian O’Mahony

THE pace of growth in credit card debt slowed in the year to end October from 18% per annum to 16.9% as private sector credit growth eased to its lowest level since July 2005.

Central Bank credit figures said the adjusted annual growth rate fell to 27.7% in October, down from 28.1% in September. Credit growth hit a six-year peak of 30.3% in June.

Despite indications of a slow down, consumers and business are still borrowing heavily.

Overall, the private sector incurred a total debt of €6.3 billion in October, pushing the total out to €309bn, still preserving our status and the most heavily borrowed country in Europe after the Dutch.

By the end of the period, total mortgage debt had hit €119bn, with mortgages responsible for up to 80% of all consumer debt in this economy.

While indications suggest the speed at which we are going into debt is easing somewhat, October still delivered the second-largest monthly increase in borrowing in the year to date of 27.7%.

Today’s figures show that for the fifth month in a row, the growth rate of non-mortgage credit exceeded the growth rate of private sector credit and residential mortgages. The adjusted annual growth rate of non-mortgage credit was 31.5% in October, down from 32% in September.

The adjusted annual growth rate of non-mortgage credit was 31.5% in October, down from 32% the previous month.

The Central Bank said that lending to non-financial corporations accounted for three quarters of the monthly change in non-mortgage credit.

Commenting on the figures Bloxham Stockbrokers chief economist Alan McQuaid said the rate of Irish sector credit growth was still running at two-and-a-half times the eurozone average.

He warned that if the euro continues to appreciate, the ECB could halt the present cycle of interest rate hikes, which could see borrowing surging ahead again in 2007, he said.

At this stage the level of borrowing by Irish households for house purchase remained steady in October, with the month-on-month change of €2bn in residential mortgages slightly above the September change, he said.

While that pushed total residential mortgage debt to just under €120bn “the annual growth rate [adjusted for securitisations and reclassifications] continued to ease slightly, to 26.5% in October, from 26.9% in September”.