The cost of credit facing many businesses was unchanged in the latest quarter, but the rates banks here are charging companies are much higher than elsewhere in the eurozone, according to Central Bank data published yesterday.
Its regular survey of interest rates for businesses and households showed that the average cost of credit banks charged all types of Irish businesses was 3% in the three months to the end of June, unchanged from March, but down from 3.25% at the end of last year.
The cost of credit for large businesses was unchanged at 3%, while interest rates charged for small businesses was also unchanged at 3%, but down from 3.25% at the end of last year.
Those figures suggest Irish businesses are being charged much higher rates than their eurozone counterparts — who pay an average rate of 2.24% for their corporate loans.
The Central Bank report covers five lenders and is part of a larger quarterly survey conducted in each country across the eurozone for the ECB. It only reports average credit costs and can therefore mask huge differences that lenders charge businesses.
The Central Bank says “credit standards” across the five business categories it covers — including loans for small and large firms and short- and long-term loans —were unchanged in the latest quarter. That may not necessarily be good news because the rapid growth in the economy — particularly in Dublin —should require an increase in lending to small businesses.
The Central Bank said its survey showed no change in the proportion of business application loans that were “completely rejected”. However, for the third quarter in a row, demand had increased for all types of business lending.
The report found that a pickup in investment, higher inventory and working capital levels, increased levels of company mergers, as well as “ongoing” restructuring of their debts — were driving the higher demand for loans in the quarter.
For households, the average cost of credit charged by banks for house purchases was 2.8% in the latest quarter, down from 3.8% in the previous quarter and 4% at the end of last year.
Again, the Central Bank publishes average mortgage costs, which include up to half of all home loan borrowers, who are on cheap tracker interest rates. Thus, the figures do not reflect the much higher rates still charged for borrowers paying standard variable rates of over 4%
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