My, how we love to borrow! We will take as much money as the banks and building societies will throw at us. Even that little bit extra to get us over the line for stamp duty on a family home, or enough to kit the apartment out with those sleek appliances.
Credit is our friend . . . well, at least according to the latest update from the Central Bank on the subject. The bank's monthly statistics for February show that the level of mortgage lending is running about 26 per cent ahead of the same month of 2002.
This growth - the highest recorded since records were first gathered in 1996 - emerged in the same week as a warning from the Economic and Social Research Institute (ESRI) on the pace at which we are taking on more and more borrowing commitments.
The ESRI reckons that borrowing could reach dangerous, market-threatening proportions in a year-and-a-half if current lending growth is maintained.
The key to the warning is a rough calculation from the ESRI that the average mortgage-holder uses about 8 per cent of their disposable income to meet their monthly mortgage repayments as things stand. This may seem low to those who have taken huge mortgages, but it makes sense as it includes new borrowers and those who only have a short term to run on small, older mortgages.
While it is nigh-impossible, in light of the available data, to work out what the average remaining mortgage term (the length the loan has to run before it is fully repaid) might be, the ESRI has taken 10 years as an average period. And it is on this basis that estimated "affordability" stands at 8 per cent.
The problem, according to the ESRI, is that this affordability rate (mortgage repayments as a proportion of disposable income) looks like tilting towards dangerous levels if overall borrowing continues to expand at its current rate of close to €1 billion per month. Before long, according to the ESRI, the affordability ratio could rise to 10 per cent. After that, it might only be a hop and a skip to 14 per cent - the level at which the UK's property market overheated in the 1990s.
It is a scary scenario and one that will send shivers down the spine of both lenders and borrowers if it becomes any more likely over the next year or so. The safety barrier standing in the way of a worsening credit situation is the Irish Financial Services Regulatory Authority - the body that regulates lending institutions and keeps an eye on their mortgage policies. While most players will tacitly acknowledge that the traditional lending multiple of two-and-a-half times salary has gone out the window, there is also an awareness that borrowers should never be advanced more than they can comfortably "afford" to pay back.
While most of the focus in this regard falls on the banks and building societies, it is naive to think that the borrower has no responsibility when it comes to the affordability of their loans.
Most would-be home buyers hear tales from their elders of how it will make sense to "stretch" their means as far as possible when borrowing to fund a mortgage. The idea is that their wages will increase as time goes on and their ability to repay the loan will also improve.
There are problems with this advice, with the possibility of a hike in interest rates (and thus less affordable repayments)always as much in the background as higher wages. There is also the small fact that much of the stretching guidance will be offered by home-owners who bought when property was cheap but interest rates were high. Now that this situation has reversed (houses are expensive and borrowing costs are low), their initial over-stretching will have taken on a rose-tinted glow.
The message in all of this is the old caveat emptor, or buyer beware. While banks and building societies should obviously lend responsibly, the borrower should equally be conscious of how their ability to repay the loan could be damaged by factors beyond their control.
