Mortgage lending continued to accelerate in December, with a record €1.7 billion monthly increase.

The rise reflects a strong end to the year for the property market and the continuation of low interest rates.

The €1.7 billion monthly increase brings the total amount of mortgage credit outstanding to €54.7 billion. This is €11 billion higher than in the same month in 2002, a 25.7 per cent annual rate of growth which is just fractionally below the 26 per cent record in February 2000.

Residential mortgage lending growth has now accelerated for five months in a row. This is despite repeated expressions of concern from the Central Bank about the trends in house prices and borrowing and a call from IFSRA, the regulator, for banks and building societies to tighten up on their lending practices.

IFSRA, which is linked to the Central Bank , completed a study of mortgage lending practices at the end of October. It said it found no reason to have concerns about "financial soundness", but called on banks and building societies to tighten up on their verification of the income of mortgage applicants and how they are funding the rest of the house price purchase.

It remains to be seen whether these measures will help to slow mortgage growth.

Mortgage lending was far and away the main driver of overall credit growth last year. Yesterday's figures showed that borrowing in all other areas except for mortgages slowed in December to an annual growth rate of 13.3 per cent, down from 14.1 per cent in November.

Combined with the pick-up in mortgage lending, this led to a 17.9 per cent annual rise in overall lending in December, fractionally down from 18.3 per cent in November.

The November figures had shown a sharp reduction in current accounts and an increase in overdrafts, related mainly to self-employed tax payments due that month. This trend was reversed in December, with a rise of €1.9 billion in current account balances, and a €326 million drop in overdrafts.

While IFSRA has warned borrowers not to over-extend themselves, research presented this week by Dr Allan Kearns, a Central Bank economist, suggests the risk of large scale default may not be that large.

He was presenting a paper to the Statistical and Social Inquiry Society in Dublin.

Dr Kearns looked at the significant increase in borrowing in recent years. He says that total indebtedness has doubled since 1990 and now accounts for 90 per cent of personal disposable income.

Total household credit is now in line with the EU average, though housing debt is a relatively high proportion of borrowing here.

Dr Kearns points out that a large proportion of mortgage debt is concentrated in a relatively small number of borrowers, many of them people who have recently taken out loans. His calculations suggest that the risk of default among this group's repayment burdens had lightened.

This is because low interest rates have cut repayment burdens, the propensity to save has improved, mortgages were more concentrated among better-off professional and managerial grades.

Also, household income remained overwhelmingly composed of employment income, rather than more volatile property or other investment income.