Ms Isolde Goggin:

No, not as defined by that legislation. One would have to go into quite a lot more detail about what exactly the market is and which bunch of consumers we are talking about. As I have said, there are all sorts of consumers in this regard: the people who are on tracker mortgage rates who are doing very well, the people who cannot get into the market at all, and the people who are in the market but are either paying more than they otherwise would or are not able to keep up repayments due to the rates they are on. We responded to the consultation on that and it is our view we would appreciate the feeling behind the desire to cap interest rates but we do not think it would work. It would discourage people from entering the market. We believe that the long-term solution is to get secure and reputable lenders in. If the rates are capped, it is a signal to banks that there is a lot of government interference in the market and they do not like that. This has come out very clearly from the interviews conducted by Dr. Keating and Mr. O'Rahilly.

Elsewhere, banks typically react to rate caps by saying to themselves, "If I am not making the margin I used to, then it makes the lending more risky." They will withdraw credit from the cheaper products that are typically designed to bring in new customers and they will try to get higher charges from their existing customers, not through the interest rate but through different fees and so on. Basically, banks start rationing credit towards people who are more able to pay.