Mortgage lending growth accelerated again in November, bringing the annual rate of increase to 25.5 per cent, according to new figures from the Central Bank.
The increase in mortgage lending comes despite some evidence of a slowdown in house price growth and an examination by IFSRA, the financial regulator, of the lending practices of the financial institutions. The total amount outstanding in mortgages rose by €1.3 billion during the month and is now more than €53 billion, according to the Central Bank's monthly statistics.
November was the first time since early 2000 that the annual rate of mortgage growth had exceeded 25 per cent. It compared to 24.8 per cent for October and was the fourth month in a row when lending growth in this area accelerated.
Mortgage growth was the main reason for an acceleration in the overall level of lending to the private sector in November, contributing about two-thirds of the total increase. Total annual lending growth had been running around 14.6 per cent for some months but accelerated in October and November and is now running at 18.3 per cent.
Total lending now stands at €157.9 billion. Lending also increased in other areas, particularly overdrafts, which rose by €465 million and term/revolving loans, which were up €1.7 billion, although the latter was boosted by reclassification of some loans out of shorter term categories.
The monthly banking figures suggest that bank deposits were sharply run down in November as self-employed taxpayers made their annual returns. There was a fall of more than €500 million during the month in current account balances and a similar rise in overdrafts, together with a rise in term loans. Meanwhile, there was strong Government net revenue flow of some €3 billion, reflected in a €3.1 billion increase in Government deposits at the Central Bank.
The Central Bank has repeatedly expressed concern about the trends in house prices and borrowing. IFSRA, the regulator which is linked to the bank, completed a study of mortgage lending practices at the end of October. While it said it found no reason to have concerns about "financial soundness", it client income verification and the funding of mortgage loans tighten up.
IFSRA also said it will be consulting with both industry and consumers with a view to introducing a requirement on every mortgage lender to disclose the basis on which they have calculated the repayment ability of their customers. It remains to be seen whether these measures will help to slow mortgage growth. Borrowers will be encouraged by signs of economic recovery and by the likelihood that interest rates will remain low for some time yet, even if they are likely to increase by the end of this year.
