Growth in house prices will continue to slow down and interest rates will remain stable during 2005, Permanent TSB said yesterday.

The lender expects house prices to rise by 5 to 7 per cent this year, compared to growth of around 9 per cent in 2004.

At an Irish Life & Permanent group briefing on the outlook for the year ahead, Mr Niall O'Grady, Permanent TSB's head of marketing, said new lending business had grown by an estimated 32 per cent in 2004 with a strong number of mortgage applications in the pipeline going into 2005.

Mr O'Grady said the bank's focus for 2005 would be to increase its share of the current account and credit card markets.

A new credit card, the ICE card, which targets people with an annual income of at least €30,000, will be launched at the end of the month and will have a market-beating interest rate of 9.9 per cent APR.

Permanent TSB said it had grown its share of the current account market from 9 to 11 per cent between June 2003 and June 2004. The bank expects the number of people who change current accounts - currently a tiny proportion of the market - will increase dramatically in 2005, following the launch in February of an industry code of practice on switching accounts.

Meanwhile, Irish Life, the life assurance and pensions arm of the group, said consumer confidence was high.

Ms Dervla Tomlin, head of marketing at Irish Life, said research conducted in December indicated that just over one-third of families expect to be better off this year than they were in 2004, with just 12 per cent feeling that they would be worse off. Some 74 per cent of people surveyed said they expected to save the same or more this year than last.

The life and pensions market returned to growth in 2004, according to Ms Tomlin. However, mortgage protection sales fell, despite growth in the mortgage market.

In the pensions arena, Irish Life has a 30 per cent share of the Personal Retirement Savings Account (PRSA) market, with 62 per cent of its PRSA customers taking out the pension product through their employers.

The company criticised the Government for only giving the Pensions Board an annual budget of €500,000 for promoting take-up of private pensions.

"Half a million is just woefully inadequate. To put it in perspective, the Government is spending multiples of that telling us all to wash our hands before we have a sandwich," Ms Tomlin said.

Irish Life welcomed the return of private investors to the equity markets in 2004.

Mr Eugene Kiernan of Irish Life Investment Managers (ILIM) said euro-zone interest rates would remain at 2 per cent and inflation would not pose a risk.

The Irish economy will grow by about 5 per cent in 2005 compared to a forecast of 1.8 per cent growth in the euro zone, he predicted.

Nevertheless, European companies are showing improved profit margins and will yield higher dividends for investors, he added.

Market valuations are currently neither incredibly expensive nor fantastically cheap, Mr Kiernan said. Equities and property will be the assets of choice for 2005, as the best time for investing heavily in government bonds has passed, he said.

The "usual suspects" of oil prices, currency volatility and geo-political concerns are among the main market risks in 2005, Mr Kiernan said.