Amount borrowed by home buyers last year ‘through the roof’ at €40bn

CLOSE TO €40 billion was borrowed last year as the scramble to buy houses and apartments forged ahead.

This was a 17% increase over the previous year when the sum borrowed topped €34.1m.

But evidence emerged towards the end of the year that the interest rate rise had started to bite, and demand slowed.

The latest figures from the Irish Bankers Federation (IBF) show that in the last quarter of 2006 lending slowed from €10.9bn in the third quarter to €10.3bn.

However, the total value of lending in the last three months of last year was on a par with the lending during the last quarter of 2005, according to the figures.

Commenting on the figures, IBF chief executive Pat Farrell said: “While 2006 as a whole showed very strong growth over 2005, the end-of-year trends confirm market moderation to more sustainable levels.”

Mr Farrell added that the slowdown did not point to any loss of confidence among home buyers.

“The strength of the market remains underpinned by such factors as economic growth of 5.5%, further employment growth, and the young age profile of the population.”

The total number of loans last year was 203,953, a growth of 1.3%.

Economists have welcomed the slowdown, which should see house prices rise by just 5% this year compared with just under 12% last year.

Total lending for domestic property has risen steadily for several years and stood at €123.3bn compared to €99bn in 2005.

With the rate due to rise in March to 3.75%, further easing in the market is on the cards.