Professor Philip Lane:

-----and because it is Government finance there is low cost of funding. The level of €600 million is a small part of the overall mortgage market so we do not have concerns about financial stability. Of course, it is more of a political judgment about the questions that are raised. These are people who have been turned away by the banks and they are receiving these cheaper, more favourable mortgages. Given that, we think the risk of default will be higher. On the other hand, they are receiving cheaper mortgages which are locked in for the duration of the mortgage. Those who have access are benefitting. It is a beneficial product. The issue is how big that product should be because if it gets too big and if there is a downturn, any losses that might be incurred will be a loss to the State.

When it is at the level of €600 million, however, it is not big enough to be a macro relevant programme, so I am not concerned about the programme from a macro financial stability point of view. The judgments are political with regard to whether it is the best use of the funding compared with other uses of that funding as well as the issues about fairness and who gets to access cheap long-term mortgages.