THE Central Bank has reported another sharp rise in mortgage and other bank lending in May, 12.5 per cent ahead of last year. This follows a 11.7 per cent increase in April.

Figures issued yesterday show much of the increase was due to a continued strong demand for residential mortgages. The Central Bank estimates that in May mortgage credit growth increased by 15.4 per cent compared with a 14.8 per cent rise in the previous month.

By contrast, however, the figures show a decline in lending volumes by banks trading in the International Financial Services Centre, down 7 per cent in the first five months of 1996.

Despite such strong growth in lending, inflation has remained low, with the latest figures showing an inflation rate of 1.4 per cent in mid May.

Mr Alan McQuaid, economist with Bloxham Stockbrokers, said that, given the Bank's worries over the inflation outlook for 1997 and beyond, he believed interest rates would stay "on hold" at current levels.