News Column

Central Bank of Ireland-Retail Interest Rate Statistics: June 2014

August 11, 2014



ENP Newswire - 11 August 2014

Release date- 08082014 - The interest rate on new loan agreements to households for house purchase, with either a floating rate or initial rate fixation of up to one year fell by 4 basis points to 3.15 per cent at end-June 2014.

This is some 51 basis points higher than the equivalent euro area rate.

The weighted average interest rate on outstanding loans to households for house purchase declined by 9 basis points to 2.74 per cent at end-June 2014. The equivalent euro area rates were 55 basis points higher at 3.29 per cent.

The weighted average interest rate on total outstanding household term deposits continued to decline to 1.93 per cent at end-June. Rates in this category have declined since May 2012. There is tentative evidence that household deposit volumes are moving from medium-term categories towards the overnight category, highlighting the low deposit rates currently on offer across all maturities.

The weighted average interest rate on new loan agreements to NFCs up to EUR1 million (often used as a proxy for SME lending) declined by 23 basis points since May.

Households

Loans to Households

The interest rate on new loan agreements to households for house purchase, with either a floating rate or initial rate fixation of up to one year, was 3.15 per cent at end-June 2014, representing a four basis point decrease from the corresponding rate in May. The corresponding interest rate at end-June for the euro area was 51 basis points lower at 2.64 per cent. Loans in this category accounted for 88 per cent of all new mortgage business in the domestic market over the past year. In contrast, floating rate loans in the euro area accounted for 27 per cent of new mortgage business over the same period.

The weighted average interest rate on outstanding loans to households for house purchase declined to 2.74 per cent at end-June 2014, falling 8 basis points since May. The corresponding end-June interest rate for the euro area was higher, at 3.29 per cent. Interest rates on outstanding mortgages in Ireland have tended to follow movements in the ECB's main refinancing rate (MRO) more closely than equivalent euro area rates due to the higher proportion of tracker and other variable rate mortgage products in the domestic market (Chart 1). However, more recently, this traditional relationship is seen to have weakened.

The weighted average interest rate on new loans to households for non-housing purposes fell by just over 98 basis points over the month, to stand at 6.40 per cent. The corresponding euro area interest rate declined by 10 basis points at end-June, to stand at 4.69 per cent. It should be noted that new business volumes for loans to households for non-housing purposes have been particularly low in recent years, resulting in a volatile series.

The weighted average interest rate on outstanding amounts of non-housing related loans was 7.11 per cent in June 2014, representing a 44 basis point increase over the month, and an 82 basis point rise since June 2013. This year-on-year increase was reflected across all three maturity categories of loans for consumption and other purposes, with loans in the medium-term category (fixation period of one to five years) exhibiting the most pronounced increase. The corresponding end-June rate for all non-housing loans in the euro area was 156 basis points lower than the Irish rate at 5.55 per cent.

Deposits from Households

The interest rates on new household term deposits fell by eleven basis points to 0.65 per cent at end-June 2014. This also represented a year-on-year decrease of 11 basis points.

The weighted average interest rate on total outstanding household term deposits continued to fall in June to 1.93 per cent, representing a 160 basis point fall since their last increase in April 2012. Developments have been mainly driven by declining rates in medium-term deposits (agreed maturity of up to two years). Over the past number of months, there has been some evidence of movement from deposits in the medium-term category towards the overnight category, emphasising the low interest rate environment. At end-June 2014, interest rates on deposits with agreed maturity up to two years stood at 1.95 per cent, representing a 74 basis point decrease since end-June 2013.

Non-Financial Corporations (NFCs)

Loans to NFCs

The weighted average interest rate on new loan agreements to NFCs up to EUR1 million (often used as a proxy for SME lending) declined by 23 basis points since May, standing at 4.9 per cent at end-June. The corresponding interest rate charged by euro area credit institutions in June was 132 basis points lower at 3.57 per cent.

In terms of new business for NFC loans above EUR1 million, the weighted average interest rate increased by 49 basis points to 3.53 per cent at end-June. The volumes in new business categories have been particularly low, resulting in pronounced month-on-month volatility. The equivalent euro area interest rate remained broadly stable in June 2014, standing at 2.16 per cent.

The weighted average interest rate on outstanding loans to NFCs issued by Irish-resident credit institutions decreased by six basis points to 3.09 per cent at end-June 2014 (Chart 2). The twelve-month average for this rate was 3.06 per cent. The euro area weighted average interest rate for the month of June was 3.25 per cent.

Deposits from NFCs

The interest rate on new term deposits from NFCs declined by twelve basis points to 0.38 per cent at end-June 2014. This rate has been relatively stable over the past year, recording a twelve-month average of 0.44 per cent. The equivalent monthly rate offered by euro area credit institutions was higher at 0.62 per cent at end-June 2014.

The weighted average interest rate on outstanding NFC term deposits fell by three basis points to 1.31 per cent at end-June 2014. This represents a fall of 49 basis points since June 2013. Annual developments were driven by deposits with agreed maturity of up to two years, which account for over 94 per cent of all NFC term deposits.

Note:

Retail Interest Rate Statistics cover all euro-denominated lending to, and deposits from, households and non-financial corporations (NFCs) in the euro area by credit institutions resident in Ireland. Interest rates on outstanding amounts cover all loans and deposits outstanding on the last working day of the month, while interest rates applicable to new business volumes cover all new loan and deposit business agreed during the month.

For retail interest rate statistics purposes, new business is defined as any new agreement between the customer and the credit institution. This agreement covers all financial contracts that specify, for the first time, the interest rate of the deposit or loan, including any renegotiation of existing deposits and loans. Automatic renewals of existing contracts, which occur without any involvement by the customer, are not included in new business. New business volumes have been exceptionally low in various instrument categories during the last number of months. Low volumes of this nature can result in increased volatility within the interest rate series.

Further information

For queries contact: Central Bank, Press Office at press@centralbank.ie or (01) 224 6299


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Source: ENP Newswire


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