Borrowing growth at its highest level in four years

The growth rate in borrowing has risen to its highest level in four years, according to new figures from the Central Bank.

They show a sharp rise in non-mortgage loans in October, pushing overall borrowing growth to 25.2 per cent, its highest level since 2000.

The rise in borrowing appears to reflect improving business confidence, although the Central Bank points out that the last time overall borrowing was growing at this level, the economy itself was growing at a real rate of 10 per cent at the peak of the economic boom.

The latest figures, published yesterday, show that mortgage borrowing also remains strong and is growing at an annual rate of 27.3 per cent, down just slightly from 27.4 per cent the previous month.

Total borrowing rose by €3 billion, or 1.6 per cent, during the month to €190.7 billion. For the first time in several months the increase in mortgage lending - at €1.4 billion - was less than half the overall increase in lending.

The other main sectors where lending increased were term and revolving loans (up €1.3 billion), loans up to one year (up €528 million and overdrafts (up €78 million).

Lending to businesses outside the financial sector accounted for 60 per cent of the growth in non-mortgage borrowing, according to the Central Bank. This may reflect an increase in business confidence, although the latest consumer survey - reported today - shows a decline in consumer confidence last month.

The Central Bank has repeatedly expressed concern about the pace of credit growth, warning that debt levels here would move well above the EU norm over the next couple of years if borrowing growth does not slow. It has also cautioned borrowers to take account of the likelihood of higher interest rates.

In a comment on the figures, Bloxham Stockbrokers economist Mr Alan McQuaid pointed out that Irish credit growth is now running at nearly four times the euro-zone average. Credit growth is unlikely to slow until interest rates start to rise, he added, and this now appears to be "a long way off".

Overall credit growth and mortgage lending are thus both likely to continue growing at annual rates of 20 per cent-plus for the foreseeable future, he said.