Profit at ICS Building Society rose 13.6 per cent to a record €128.8 million last year, writes Caroline Madden.

The growth was underpinned by a strong performance in the mortgage market, with new mortgage lending at the Bank of Ireland subsidiary climbing by 14 per cent to €1.963 million, while its mortgage book jumped by almost 20 per cent to €6.227 million.

Following a strong final quarter, in which ICS won 5.2 per cent of new mortgages, the society's share in the overall mortgages market increased to 4.9 per cent.

However, chairman John Collins noted at the ICS annual general meeting (AGM) yesterday that rising interest rates had impacted on affordability in the housing market. "We have seen a slowdown in market demand for new mortgages in recent months," he said.

He predicted that house price inflation would ease to 3 per cent this year, following a 10-year period during which average prices have grown by roughly 15 per cent a year.

However, Mr Collins said that the outlook for the market remains positive. "With price inflation slowing and as we near the peak of the interest rate cycle, we expect demand for new mortgages in the Irish market to be strong in 2007," he said.

One speaker at the agm inquired whether ICS had repossessed homes last year. Lynda Gallagher, head of credit and risk management, said two repossessions of Irish property occurred during the year, but stressed that this was not unusual and did not represent "anything systemic".

Speaking after the agm, managing director Joe Larkin said uncertainty as to whether interest rates would increase past the 4 per cent level was a bigger issue in the housing market than stamp duty.

If interest rates continue to rise past 4 per cent, Mr Larkin expects that the mortgages market may be "good but slower" in the second half of 2007.