Professor Philip Lane:

I am keen to make several points. Our view is that this approach has many downsides. We are of the view - the ECB opinion is relevant as well - that there are many problems with this approach to intervening in the mortgage market. In general, caps on interest rates have many problems. In the end, it is for the Oireachtas to decide.

The ECB opinion cited various countries where there is some form of ceiling on interest rates. By and large, in those cases, the parliaments are setting the ceiling. There is a law or formula to the effect that the interest rate can be no more than Z above the average in the market. That is for the Oireachtas to decide.

There are problems with putting any cap in place. An extra layer of problems is associated with asking the Central Bank to take on the role of assessing the level of competition in the mortgage market. Typically, that role is played by competition authorities rather than central banks.

There are two debates over the Bill. One relates to the question of whether in general interest rate caps are a good idea. We can debate that question. Let us suppose we take the view that an interest rate cap is something the political system wants to back. Then the question is how we go about it. Throughout Europe, the pattern is that the parliament or legislator specifies a formula for the maximum as it relates to a reference rate, as opposed to the current position, which is that the Central Bank is asked to undertake a market structure review. Beyond the fact that it is a role for a competition authority, there is also the issue that it will be very problematic to run at an operational level. Many legislators throughout Europe have specified a ceiling on interest rates. It has the nature of a law with a given ceiling rather than asking the Central Bank to work it out.