Mortgage lending may be peaking - Central Bank

Growth in mortgage lending may have reached its peak but other types of lending continue to boom, according to figures released by the Central Bank yesterday.

The new statistics show that overall lending to the private sector continued to grow sharply in January, climbing by 26.6 per cent on the same month of 2004.

The growth rate, which held steady from December, was driven in the main by non-mortgage credit, such as car loans or loans for home improvements.

The Central Bank said loans other than mortgages had accounted for most of the €3.3 billion increase in private-sector credit over the month.

Year-on-year growth in this non-mortgage credit was, by consequence, ahead by 24.8 per cent on January, 2004. Annual growth in December stood at 24.4 per cent. The rate of expansion is now more than 10 percentage points higher than it was a year ago.

Term loans have delivered 70 per cent of the increase in non-mortgage credit over the past five months, according to the Central Bank.

The bank described the growth in overall credit as "strong and steady". The trend is unlikely to bring much comfort to the bank, which is concerned about the fierce pace of growth in lending to Irish consumers.

But there may be a germ of succour in the latest mortgage lending figures, with the bank acknowledging yesterday that the peak in this area may be passing.

The January numbers show annual growth of 26 per cent, down from 26.5 per cent in the previous month. The annual increase has been easing consistently since last July, pointing to a less frenetic housing market.

Bloxham's chief economist Alan McQuaid yesterday predicted that declines in mortgage lending growth would become more apparent in the second half of the year as the European Central Bank (ECB) moves to raise interest rates from their current historical low.

The monetary value of mortgage lending in January was about half of the €1.9 billion recorded in the previous month, in line with expected seasonal factors.

A breakdown of the overall credit numbers shows that the value of short-term loans of less than a year grew by €1 billion last month, with term loans expanding by €855 million. Overdrafts were up by €406 million.

On the deposit side, special savings incentive account (SSIA) balances rose by €145 million to reach almost €5 billion at the month.