Mortgage debt rose almost 29 per cent in the year to January and outstanding debt now exceeds €100 billion, according to data released yesterday. The figure, which stands at €100.4 billion, has doubled in just three years.
Figures from the Central Bank show that mortgage lending rose more rapidly than borrowing in other sectors of the economy for the first time in six months in January. That month's jump in mortgage lending, €1.5 billion, was the highest ever for the first month of the year.
A survey released yesterday by Permanent TSB and the ESRI yesterday showed that growth in house prices accelerated to 10.2 per cent in January, from 9.2 per cent in December.
Total private sector credit, which includes non-mortgage lending to households and business, rose by 28.8 per cent in January. The total amount of outstanding credit now stands at over €262 billion.
Dermot O'Leary of Goodbody stockbrokers said that the European Central Bank (ECB) was worried by strong credit growth across the euro zone
"The ECB has pointed out repeatedly the risks posed by rapid credit growth in the euro-area. This is particularly relevant to housing markets across the bloc. These data will further reinforce its view that the era of ultra-cheap money must come to an end." The ECB governing council is expected to raise interest rates by a quarter percentage point when it meets tomorrow.
Bank of Ireland chief economist Dr Dan McLaughlin yesterday forecast that both the ECB and the US Federal Reserve would increase key policy rates this month.
"March may well prove a bad month for borrowers in both euros and dollars with the ECB moving the repo rate to 2.5 per cent tomorrow and the Fed pushing up short rates to 4.75 per cent on the 28th."
But Rossa White of Davy stockbrokers said that SSIAs would help to prevent a slowdown arising from any rate increases.
"They will be tested this year as ECB rates reach 3 per cent or probably 3.25 per cent, pushing mortgage rates another one percentage point higher. There may not be a slowdown in borrowing as people use SSIA collateral over the next couple of years. But it will surely happen in 2008," he said.
Labour Party spokeswoman on finance Joan Burton accused banks of ripping off customers .
"With financial institutions making a killing on secondary items attached to loan packages such as penalty fees and unnecessary insurance schemes, it seems that IFSRA is not being tough enough on the wide margins given to banks and individual lenders."
