RESIDENTIAL mortgage lending surged ahead in April, putting upward pressure on underlying credit growth and a halt to any lingering hopes of further interest rate cuts.
Mortgage lending was up 14.8 per cent year on year in April compared with 14.1 per cent a month earlier and an average of 13.6 per cent in 1995, according to figures released yesterday by the Central Bank.
This fed through to underlying credit growth of 11.7 per cent from 11.3 per cent in March. Economists had predicted that growth would remain static at 11.3 per cent. The figures help to explain the bank's recent concern about house inflation.
Annual growth of non mortgage Irish pound credit fell marginally to 11.1 percent in April from 11.3 per cent the previous month.
"All the dynamic was in the housing side," said Mr Dermot O'Brien, economist at NCB Stockbrokers. "The underlying number is still below the 12.6 per cent, peak it reached in October 1995.
However, the growth in mortgage lending may be of concern to the Central Bank.
According to Mr Alan McQuaid, economist at Goodbody stock brokers. "The authorities have already made it quite clear about what they see as rather lax lending policies."
The recent Central Bank annual report reiterated the point that low inflation remains a key priority and the bank has express concern about the risk of higher house price inflation feeding into consumer prices.
The other main worry for the Blank will be that this was the third month in a row that mortgage lending increased.
The Central Bank also announced that the adjusted rate of money supply growth fell to 12 per cent in April from 13.3 per cent in March. Larger than normal funding by the National Treasury Management Authority (NTMA) of £884 million contributed to the slowdown.
The official external reserves at end of April were down £31 million at £5.18 billion. This was mostly due to payment of foreign debt as the effect of foreign exchange interventions was "neglible".
Mr O'Brien added that the figures will underline the Central Bank's determination not to follow yesterday's rate cut in Britain and other European countries. Britain unexpectedly cut official interest rates by a quarter of a percentage point to 5.75 per cent, the fourth such cut since last December.
The Chancellor of the Exchequer, Mr Kenneth Clarke, said his decision was justified by low inflation and "below trend" economic growth, but many analysts said the move was politically motivated.
Soon after Britain cut its base rates, the Bank of France announced a cut in its repurchase rate while Denmark also announced rate cuts. Spain and Sweden cut key rates earlier in the week.
