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Personal loan drawdowns surged in the first three months of the year despite interest rate hikes introduced to suppress borrowing and drive down sticky inflation.
A new report from the the business group representing banks showed the number of personal loans jumped almost 28% in the first three months of the year from the same period last year, and reached a value of €481m, an increase of 25%.
The findings of the report signalled there was an increase in consumers looking for loans for recreational spending as the cost-of-living crisis put pressure on savings post-Christmas.
Included in this activity was a rise in car and home improvement loans, the Banking and Payments Federation Ireland (BPFI) found in its latest report.
More than 15,000 car loans were drawn down worth €187m, with the volume rising by 27% year on year and values rising by almost 40% over the same period.
Meanwhile, personal lending for home improvement rose by 29% year on year to almost 14,000, while the value rose by 17% to €147m.
Personal lending in these areas reached the highest volumes and values since the data series began in 2020.
There was also growth in “loans for other purposes such as holidays and special occasions” during this period, said BPFI chief executive Brian Hayes.
The number of loans for education, holiday and special occasions such as weddings climbed 27% to 20,119, while the value increased by 18% to €146m.
The average loan value fell overall by about €200 to €9,763, the lowest level since the final quarter of 2021, but the average car or auto finance loan rose by €1,073 to €11,678, the report showed.
This increase is “likely reflecting rising car prices and growth in electric and plug-in hybrid vehicles”, said Mr Hayes.
Meanwhile, loans to pay for home environmental improvements or to enhance energy efficiency, or so called green loans, also rose in the March quarter.
The value of green personal loans soared by 95% compared to the same period a year earlier and almost doubled to €20m.
The number of green loan drawdowns increased by 82%, despite the rising cost.
The average green loan reached €22,486, compared with the average for all loans at €9,763, according to the report.
It is not yet clear if the ECB will impose another interest rate hike in September, which could put more pressure on household finances.
The BPFI represents the banking, payments and fintech sector.
The business group is made up of about 125 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial market in the Republic.
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