THE governor of the Central Bank, Mr Maurice O'Connell, has once again warned against the aggressive selling of mortgages by banks and building societies. He said such selling could have "unwelcome consequences for the economy in general and for individual borrowers".

Addressing the Dail Finance and General Affairs Committee, Mr O'Connell said: "The Central Bank has been monitoring carefully the expansion of credit, particularly mortgage credit. Recent trends in house prices could have the effect of heightening inflationary expectations."

The governor said that the Central Bank did not have the legal authority to impose limits on loans and that, in any event such an approach would be inappropriate. The Central Bank has however, reminded the mortgage lending institutions of their "obligation to exercise traditional prudential standards".

On the sterling exchange rate, Mr O'Connell told the committee that the appreciation of the pound against sterling had not produced major problems.

The majority of suppliers to Britain, would maintain sales to that market, despite declining profit margins, he added.

"Irish industry now has the advantages of lower inflation and lower interest rates against UK competitors. These advantages are substantial and they may compensate for the impact of a relatively strong exchange rate," he said.

On European Union and a single currency, Mr O'Connell told the committee "I never said EMU was an unmixed blessing", although "it does offer the possibility of low inflation and low interest rates".

On the effect of a sterling devaluation if Britain stays outside EMU, Mr O'Connell said: "I cannot see what advantage it would be for sterling to go into a competitive devaluation.

However last week Mr O'Connell told foreign reporters that Britain did devalue post EMU indigenous jobs would be at risk. "Fifty thousand of what I term front line jobs may be under threat if there is a substantial devaluation of sterling.

"If we don't join EMU then we may face higher interest rates. If you look at us, we are still substantially higher than Europe. We are hoping that we can get rid of that differential altogether if we join," he said, pointing out that one month money market rates in Ireland are 5.2 per cent, compared to 3.3 per cent in Germany. Mr O'Connell also stated that not joining EMU would mean that Ireland would not be considered as attractive a location for foreign companies.