Mortgage credit growth has accelerated again, reaching 26.9 per cent in March, its highest level in more than two decades, according to figures released yesterday by the Central Bank.

The data will increase concern that some borrowers may be over-extending themselves to take out sizeable loans.

Almost €1.3 billion in new mortgages was extended in March alone, bringing total outstanding mortgage debt to €57.9 billion. Despite signs of some slowdown in house price growth, almost €11 billion in new mortgage lending has taken place since last June. Just two years ago, outstanding borrowing was €35.6 billion, meaning the increase in the meantime has exceeded €22 billion.

The Central Bank warned in a recent bulletin that borrowing would have to slow if the overall level of credit in the economy was not to reach a dangerous level. The current level of credit is not out of line internationally, the bank concluded, but credit growth in recent years has been three times the euro-zone average, meaning borrowing here could quickly move above the norm.

There have also been a series of warnings about the danger of the property market overheating and strong borrowing growth is likely to keep house prices on the rise.

The Central Bank first started publishing mortgage lending figures in 1996 and the latest increase is the highest in this official series. The bank says that its research shows that mortgage credit may have been growing slightly faster in 1981. However, as the rate of inflation was around 20 per cent at the time, the increase in borrowing back then was largely driven by rapidly increasing prices.

The rate of mortgage growth is now well ahead of house price growth, measured by the latest Irish Permanent/ ESRI index at 12.9 per cent in March.

The buoyant credit growth appears to reflect continued strong demand in most areas of the housing market during the busy spring period, including new homes, people trading up and investment purchases. The strong rate of new house building is also likely to be affecting the figures by making more properties available for purchase.

Borrowing is also strong in other areas, reflecting an improved economic environment and a lift in consumer and business confidence. Total lending by credit institutions in Ireland to non-Government Irish residents rose by almost €6 billion, or 3.6 per cent, during March to €170.6 billion. The annual growth in non-mortgage credit increased to 18.8 per cent in March, from a revised 15 per cent in February. This meant that almost 80 per cent of the additional credit advanced during the month went to other sectors of the economy apart from mortgages.

Repurchase agreements, often a volatile element, accounted for one third of the total change, increasing by €1.9 billion during March.

Short-term loans rose by €1.1 billion and term loans by €1.8 billion, while overdrafts rose by just €51 million.

Borrowers may be encouraged by the outlook for interest rates, which are expected to remain at current levels for some time, given slow growth in the euro economy. Some market analysts believe that interest rates could edge lower if growth does not start to recover.

As interest rates are set by the European Central Bank, the Central Bank here has no policy weapon to try to slow lending growth.

IFSRA, the regulator which is linked to the bank, has been discussing lending policy with the banks and has called on them to tighten up in some areas.

However despite this mortgage lending growth continues to accelerate, rising from 23-24 per cent in the early-to-middle part of last year to 26.9 per cent now.