Mr. Jeremy Masding:

I thank the Deputy for the question. On new mortgages, we were the first bank to introduce risk-based pricing. As such, we no longer in the purest sense have a standard variable rate for new mortgages. Rather, we have something called a managed variable rate, whereby we try to reward the level of equity that our customer can put into a mortgage. I wanted to place on the record that for new customers we have a managed variable rate.

In terms of the back book, I appreciate of course that it might not be clear why a customer who takes out a mortgage today might pay a different rate from someone who took out a loan in the past. Banking is about pricing a new mortgage on the basis of the cost of adding the marginal cost of funds to the balance sheet. For example, if I was to issue a mortgage today for €250,000, I would price it off the money in the market that I could get today. For customers who took out a mortgage in the past, the price was based on the appropriate funding mix to support that mortgage at that moment in time. It is all a point-in-time decision. To the extent that funding costs in the past were higher, which they were across the whole Irish banking sector, the cost of the loan to the customer will be higher than that available to a new customer today. It is important to place that on record, given that Irish banks had to pay a significant market premium - Permanent TSB included - for their liabilities or funding for the last number of years, which premium is now being managed down. As such, the Deputy will understand that lending to new customers might be cheaper than for existing ones. That is the second thing I say. The third is a "however".

I also would say, as an experienced banker, that I expect the situation to change. As the funding environment returns to a more normalised level, the imbalance between historic and current costs should right itself. That means the cost of funding historic mortgages and the marginal cost of new mortgages will get closer to each other. As the market normalises, banks will have a greater ability to develop propositions that meet the needs of both existing and new customers. Of course, I am acutely conscious - and the Deputy will not hear me counter anything he says in this regard - that SVR customers might seek to get a lower rate by switching to another lender whose lending criteria they can meet. Of course, with my marketing hat on, this represents an opportunity for us to win business and, if we are not competitive, it is an opportunity for other lenders to win business from me. What I am trying to do is strike a balance between earning a return for our shareholders and ensuring we remain competitive. As such, the final thing I would say is the following. The Deputy uses the word "strategy," and I agree with him 100% that it is important that this organisation has a mortgage strategy that is understandable, clear, coherent and simple for customers. That is my goal.