Bank lending increased last month but, when exceptional items are excluded, growth between June and July was steady, according to the Central Bank.

Figures issued yesterday recorded a 12.5 per cent rise in private-sector credit growth in July, up from 11.8 per cent in June. Demand for residential mortgages continued to accelerate and the annual rate of increase when adjusted for mortgage securitisations was 19.6 per cent, compared with 19.4 per cent in June.

Short-term market interest rates remained stable during July at just over the main European Central Bank's key rate of 3.25 per cent.

Lending to Irish residents excluding the Government increased by €1.5 billion to €135.7 billion, up 1.1 per cent compared with the figures for July 2001.

The biggest increase was reported in residential mortgages which grew by €802 million, up 1.8 per cent.

Term and revolving loans increased by €646 million and loans up to and including one year rose by €494 million.

There was a slight reduction in the demand for overdrafts which contracted by €445 million and the amount of money advanced under repurchase agreements amounted to €139 million.

Lending to non-bank entities trading from Dublin's International Financial Services Centre increased by €467 million compared to a fall of €127 million in the same month last year.

Irish financial institutions contributed €135 billion to the euro area's broad money stock in July, equal to about 2.5 per cent of the total. This represented an increase of €7.2 billion, or 5.6 per cent, over the month compared to a fall of €1.5 billion or 1.2 per cent in the previous year.

The figures reflect an increase in non-Government deposits which rose by €5.2 billion, following a sharp increase in the number of deposit accounts with a two-year maturity which rose by €4.7 billion.

At the end of July, the amount of money held in these accounts increased by €124 million to €905 million.