Private sector credit growth fell to its lowest rate in a year last month, figures released yesterday by the Central Bank show.

The decline coincided with the fourth rise in interest rates this year and, according to the bank's figures, marked the lowest growth in residential mortgage lending since the start of the year.

The adjusted annual growth rate in private sector credit was 28.2 per cent in August, compared with 29.2 per cent in July, and the peak of 30.3 per cent reached in June.

According to the bank, the amount of private sector credit taken on by Irish businesses and consumers increased by €3.6 billion in August, bringing the total outstanding to €297 billion.

At 31.7 per cent, non-mortgage credit moderated slightly in August, though the rate of increase was still faster than both mortgage and overall private sector credit.

Consumer credit, which accounts for about one-tenth of outstanding non-mortgage credit, has increased by more than 15 per cent in the six months to August.

While these latest figures imply that the recent increases in interest rates by the European Central Bank are starting to deter borrowers, Alan McQuaid, chief economist at Bloxham, is quick to point out that, despite the slowing, the level of borrowing in Ireland is still running at almost three times the Eurozone average.

"Irish consumers don't seem to have been too deterred from borrowing money," he said, adding that anecdotal evidence suggests that some households are using these borrowings to fuel lifestyles they can't maintain in the long run.

"This reckless borrowing is , in our view, in many cases akin to playing Russian roulette with a loaded gun, with the risks loaded to the upside, and probably a heavy price to pay when the economy inevitably slows."

More interest rate hikes - another two are possible before the end of the year - may have a further impact on individual disposable incomes over the coming months, although the maturing of the Government's Special Savings Incentive Accounts (SSIAs) may help to offset some of impact of higher borrowing costs.

The underlying annual growth rate of residential mortgages was 21.7 per cent in August, down slightly from the 27.6 per cent growth rate seen in July.

Still, demand in absolute terms remained strong, increasing by €2 billion, to bring the total outstanding level to €115.2 billion.

Residential mortgages have increased by €16.2 billion since the start of the year, giving a monthly average of €2 billion.