Cars, Holidays, and Home Improvements Drive Demand for Credit

The post-Covid-19 spending habits have led to an increase in demand for credit, with cars, holidays, and home improvements being the main drivers. According to recent data from the Banking & Payments Federation Ireland (BPFI), personal loan drawdowns have surged by 25.2% in the year to end-March 2023, reaching €481 million, while the number of loans increased by 27.8% to 49,236.

It’s important to note that these figures started from a low base due to subdued personal lending during the Covid-19 pandemic. However, the growth is also reflected in broader figures from the Central Bank, which show a 33% increase in new consumer loans in the year to June 2023.

The move towards electric cars has driven a surge in car loans, both in terms of the number of loans and their value. In the first quarter of 2023, the number of car loans increased by 27.4% compared to the same period last year, while the value of these loans rose by almost 40%. The higher cost of electric cars compared to petrol and diesel vehicles is one of the reasons behind this trend.

Home improvement loans have also seen a significant increase, with a surge of nearly 30% in the number of loans being taken out with banks. This can be attributed to the rise in heating and electricity costs that households have experienced over the past year. Lenders are offering favorable rates for those looking to carry out home improvements.

There has also been an increase in borrowing for holidays, weddings, and other special occasions. In the first quarter of 2023, the number of loans for these purposes rose by 27.4% to 20,119. However, the value of such loans increased by only 18%.

When seeking a personal loan, it is advisable to shop around for the best rates. While interest rates on personal loans have not increased significantly in the past year, it is still beneficial to compare options. For larger loan amounts, it may be more cost-effective to explore mortgage-type arrangements, especially for homeowners.

Ultimately, choosing a shorter repayment term can help save money on interest. It is important to consider the APR and compare rates from various lenders. One of the lowest rates available is 6.4% from Permanent TSB (PTSB), but this rate requires offering cash security of 100% for the loan.

In conclusion, the demand for credit has increased in various sectors due to post-Covid-19 spending habits. Cars, holidays, and home improvements are the primary drivers of this demand, with personal loan drawdowns reaching new highs. It is essential to consider all options and compare rates when borrowing to ensure the most cost-effective solution.