BoI: Mortgage debt not excessive

Mortgage debt in Ireland has risen by €3.2bn over the first quarter of 2004 resulting in year-over-year growth of 26.9%.

Debt in the housing market stood at €62.4bn at the end of March.

Given the strong performance of the global economy, the only issue in relation to interest rates is the timing of a rate rise, the latest property review from Bank of Ireland states.

A near term rise in European Central Bank rates is not likely but BOI predicts that a rate rise will happen by the end of this year.

Rate increases will follow at a pace and scale that are unlikely to have a major impact on the property market, the report adds.

Commenting today, Joe Larkin, Managing Director of Bank of Ireland Mortgages said: "With the average new mortgage last year at €160,000, there are no indications that individuals are borrowing excessive amounts. The fact that the average loan-to-value ratio continues to be around 60% backs this up.

"According to Central Bank data Irish debt levels relative to the size of the economy are in line with the EU norm, despite the extraordinary pace of growth in recent years.

"The implication is that Irish debt levels were unusually low a decade ago – due of course to our high unemployment and double digit interest rates,” Larkin added.

A number of trends are also evident in Q1 with the price of new houses rising faster than existing ones.

There was a 3.9% gain in the price of new houses while second-hand houses rose 1.7%, representing a reversal in the trend towards second hand housing.