The annual rate of credit growth picked up again in February, having paused in January. New figures released by the Central Bank yesterday show that private sector credit surged by 26.9 per cent last month, compared to 26.6 per cent in January.

As has been the norm since last October, residential mortgage lending growth declined. The Central Bank again said demand for residential mortgages may have peaked.

Non-mortgage lending accounted for more than 60 per cent of the €3 billion rise in private sector credit. Year-on-year growth rose to 25.3 per cent from 24.8 per cent in this category.

The figures show that residential mortgages expanded by €1.1 billion, while overdrafts rose by €346 million and term or revolving loans increased by €852 million.

Net mortgage lending, adjusted for securitisations, increased by about €800 million during February, around €80 million lower than in February 2004.

Total lending by credit institutions in Ireland to non-government Irish residents increased by €3 billion, or 1.5 per cent to €205.9 billion in February, according to the Central Bank. Most of the increase was euro-denominated, but non-euro lending still expanded by what the Central Bank termed "a significant €262 million".

There was a fall of €78 million in lending to non-bank IFSC companies. Special Savings Incentive Accounts (SSIA) balances rose by €140 million to €5.1 billion at the end of February.

Alan McQuaid, chief economist with Bloxham Stockbrokers said while too much emphasis should not be placed on a single month's data, "this indicates further that demand for residential mortgages may have peaked".

"Demand remains very high for credit in Ireland, and it is hard to see a significant easing off in credit growth until interest rates start to rise," Mr McQuaid said.

"While the ECB is hinting that the next move in rates, when it comes, will be upwards rather than downwards, the sluggish nature of the euro zone economy suggests that rates won't rise until the second half of 2005."