Card balances could be sign of pressure from rising interest rates and higher energy costs.

Growing credit card debt could be a sign of emerging stress for borrowers as climbing interest rates and higher energy costs take their toll on household budgets, IIB Bank chief economist Austin Hughes cautioned yesterday.

Credit card debt accelerated from a 17.6 per cent annual rate of increase in May to an 18 per cent rate of increase in June - the fastest rate of increase since August 2003.

Mr Hughes said it was notable that the increase in credit card debt in June reflected the fact that, while the rate of new borrowings and the repayment of card debts both eased compared to May, the slowdown in repayments was greater than the easing in new borrowings.

"This could be a random development or it could be a pointer to an increase in stress for some households as a result of rising interest rates and higher energy costs," he said.

Although credit card debt represents only a small part of borrowing in the Republic, accounting for €2.3 billion out of the total borrowings of €289 billion, it is worth watching for any indication of emerging difficulties, Mr Hughes said.

The trend in new credit card borrowings and repayment rates over the next few months may give some idea of the extent to which some borrowers are struggling with higher mortgage repayments, he added.

The latest figures from the Central Bank show that private sector borrowing increased again in June, with the annual rate of growth exceeding 30 per cent for the first time since March 2000.

Annual growth rate in private sector credit rose to 30.3 per cent in June, up from a rate of 29.8 per cent in May.

Private sector credit has now increased by a monthly average of €5 billion during the first six months of 2006 and rose by €5.8 billion in June, bringing total private sector borrowings to €289 billion.

For the second month in a row, non-mortgage credit had a higher annual growth rate than mortgage credit, rising to 32.6 per cent in June, up from 29.7 per cent in May. Term loans rose by €4 billion, the largest increase in a year.

Mr Hughes said that while loans between financial companies accounted for a good deal of the increase in private sector credit growth, underlying trends remained strong.

He said he expected mortgage growth to stabilise as the influence of higher interest rates offset the impetus to borrowing coming from a young population, buoyant house prices and a strong economy.

Recent strong growth in residential mortgage lending continued in June, although the annual growth rate eased slightly, falling to 29.1 per cent in June, down from 29.5 per cent in May.

The month-on-month change in residential mortgages was the highest so far this year at €2.3 billion, bringing the total value of outstanding residential mortgages to €110.8 billion.

Overdrafts fell by €828 million and loans with terms of one year or less grew by €1.2 billion.