The personal loans market experienced notable growth in the first quarter of the year, driven by a surge in car purchases. According to the latest data from the Banking and Payments Federation Ireland (BPFI), a total of 16,089 car loans, amounting to €208 million, were approved during this period. This represents a 6.1% increase in volume and a 10.7% increase in value compared to the previous quarter.
The strong performance in car loans contributed to a significant rise in overall personal loan drawdowns, which reached €551 million. This figure is the second highest recorded since BPFI began tracking these metrics in early 2020.
Anthony O’Brien, Head of Sector Research & Analysis at BPFI, attributed the growth to the thriving market for new car sales, particularly in the first quarter, which is crucial for the automotive industry. However, O’Brien also highlighted the importance of the second-hand car market. He noted that while about 25% of car buyers opted for second-hand vehicles, less than 20% purchased new cars. “The second-hand car market is very important, and banks and credit unions have played a significant role in supporting this sector,” O’Brien said.
In addition to car loans, over 20,600 loans were drawn down for various purposes, including education, holidays, and special occasions such as weddings. This category saw a 2.7% increase in volume year on year, with the total value rising by 21.1% to €177 million.
Conversely, home improvement loans saw a decline in the number of loans issued, down by 6.7% year on year to 13,009. However, the total value of these loans increased by 12.9% to €166 million. O’Brien expressed surprise at the drop in the number of home improvement loans but anticipates that recent initiatives, such as the Home Energy Upgrade Loan Scheme launched by the Government, will invigorate this sector. He noted that several BPFI member banks have already joined the scheme, and more lenders are expected to participate, which could help bridge financing gaps for significant home retrofits.
Green lending also showed robust growth, albeit from a smaller base. The value of green personal loans reached €27.1 million in the first quarter, marking a 38% increase year on year. The volume of these loans rose by 38.3% to 1,209. The average green loan amounted to €22,432, more than double the value of an average personal loan (€11,062) and significantly higher than the average car loan (€12,901).