Mr. Brendan Burgess:

The Irish banks could do that. The Irish banks would be very profitable lending money at 2% to Irish borrowers. They choose not to because, as Mr. McNally pointed out, they do not have to. There is no real competition there. The lowest rate is 3.1%. That is for people with a clean credit record with less than 50% loan to value. Irish banks could lend at 2% and would make plenty of profits at that, so they just choose not to. There is more competition in other countries. There are plenty of banks competing actively for it.

The link between the cost of funds and the mortgage rate has been broken in this country. About four or five years ago when Permanent TSB was charging Mr. McNally 6.25%, AIB and Bank of Ireland were charging 3%. At the time, they were paying about 3% for deposits and they also had to pay the eligible liabilities guarantee, ELG, on deposits. I argued at the time that those mortgage rates were unsustainably low so I am not here saying that I want everything to be as low as possible and I want tracker mortgages for everybody. I was criticised for calling on banks to raise rates to an acceptable level. They did start bringing them up and then they just way beyond what they should. There is nothing to stop Irish banks charging a fair mortgage rate.

One of the reasons given in the Central Bank report mentioned by Deputy Sherlock and the Minister was that the Irish banks are still recovering from the bad losses they made. The Irish banks have fully provided for home loans in their accounts. They have set reserves aside in full so for last year and the previous year, their profits were boosted by writing back profits. The bad loans in the past have actually been a source of profits for the Irish banks and they should serve to bring down mortgage rates and not be used as an excuse for raising them.