Growth in borrowing weakens in November

Growth in private sector borrowing weakened for the first time in five months during November, according to the latest figures from the Central Bank. The fall came in spite of a surge in mortgage borrowing, which posted the strongest adjusted monthly increase on record.

The Central Bank said year-on-year growth in private sector credit had fallen from 29.4 per cent in October to 29 per cent in November. The slight decline in annual growth coincided with a monthly rise of €5.3 billion in private sector borrowing, the third largest monthly increase on record.

The bank also pointed out that the November monthly increase would have been even larger if a €1.5 billion increase in the securitisation of residential mortgages had been included in the figures. Securitisations are excluded from overall private sector credit data.

In November, this led to what the Central Bank called an "unusual situation", whereby the growth rates for both non-mortgage credit and residential mortgages both strengthened, but the overall private-sector credit growth rate fell back.

The annual growth rate for residential mortgages, after being adjusted for securitisations, rose from 26 per cent in October to 26.4 per cent in November.

At more than €2.1 billion, this was the largest adjusted monthly increase recorded to date.

This means that the six largest recorded monthly increases in residential mortgages have all come in the last six months. The average monthly increase in this period was €1.95 billion.

Last month, the Central Bank warned that private sector credit growth posed a significant risk to the economy, noting that supporting factors such as low interest rates would not be in place forever. The bank's latest figures show that while residential mortgage borrowing grew faster than non-mortgage credit during the first half of 2005, the opposite occurred in the second half of the year.

Since July, annual growth in non-mortgage credit has been accelerating. The adjusted growth rate in this type of borrowing (which includes overdrafts and personal loans) rose to 30.5 per cent in November from 29.9 per cent in October.

A breakdown of the overall numbers shows that term or revolving loans increased by almost €3.5 billion in November, while loans of up to and including one year grew by over €900 million. Residential mortgages increased by €652 million on an unadjusted basis and other loans rose by almost €300 million.