Figures released by the Central Bank today indicate continued growth in the country's private sector credit levels despite warnings last month that such growth was unsustainable.
Total private sector credit grew at an annual rate of 29.4 per cent last month, close to three times the euro zone average and matching figures last October when the rate hit its highest level since March 2000. The February rise was up from 28.8 per cent in January.
Private sector credit rose by €5.6 billion in February to €268 billion, with households accounting for nearly 46 per cent of the total.
The Central Bank warned in January that rapidly rising house prices coupled with large increases in household indebtedness were two of the main risks to a thriving Irish economy.
It pointed out that for debt to increase at more than three times the rate of income was unsustainable.
Non-mortgage credit grew at a slower rate than mortgage credit for the second month in a row, with its adjusted annual growth rate rising to 29.0 per cent from 28.5 per cent in January.
Almost half of the increase in non-mortgage credit was attributed to non-financial corporations.
Residential mortgage lending in the booming property market continued to expand at a rapid pace in February, when the year-on-year growth rate, adjusted for securitisations, hit 29.6 per cent.
House price rises, which slowed at the start of 2005, picked up again in the second half, and 2005 was a record year for house building. Economists expect prices to rise 8 per cent this year after a 9.3 per cent gain in 2005.
Credit institutions contributed €152.1 billion to the euro area's broad money supply in February, a monthly increase of €1.3 billion or 0.9 per cent. The year-on-year growth rate fell to 15.1 per cent compared with a revised 17.2 per cent in January.