HAVING risen sharply to almost 14 per cent during the currency crisis of late 1992/ 93, mortgage interest rates have been on a generally downward trend ever since.
However, it is only in recent months that this has sparked a sharp increase in borrowing from banks and building societies.
Borrowers were wary for a long time that the sharp rise in interest rates experienced in late 1992 and early 1993 might be repeated and it has taken time for them to become confident that rates could hold around current levels.
This has caused something of a dilemma for the Central Bank. A sharp rise in borrowing is one of the few inflationary signals in the economy at the moment.
The bank will also realise that while interest rates are low in nominal terms, in real terms in other words when compared to an inflation rate of 1.4 per cent they still impose a cost on borrowers.
Consumer price index figures and wholesale inflation data also remain subdued. So what's the problem?
Central bank's feel that their role in life is to worry. The judgment the Central Bank of Ireland is being forced to make is whether the high level of borrowing is inflationary.
With the economy growing so rapidly and much of the borrowed money going towards business investment rather than consumer spending, this is not an easy judgement.
Even borrowing to fund consumer spending is not necessarily inflationary, provided there is enough capacity in the economy to meet the extra demand.
The bank's main concern appears to be trends in the housing market and the risk that spending on houses and related spending could lead to inflationary price increases in some areas of the economy.
The bank may want to see a small increase in bank and building society interest rates to take some of the steam out of the market.
The situation will also cause some other difficulties for the Central Bank. While it may not mind the pound edging up against sterling after all this helps to keep import prices down its political masters will face pressure from exporters.
But with next year the one which counts towards qualification for the single currency, keeping inflation in check will remain the key focus of the Central Bank.
