Mr. Ed Sibley:

There are a number of reasons for interest rates being higher in Ireland, and we discussed some of them with the committee previously. Part of it is a factor of the crisis we had. We still have the legacy of that crisis today. It is evident that mortgage lending in Ireland has historically been riskier. That results in banks having to hold more capital relative to that lending, which also has an influence on price. We are comparing averages, but there are significant differences in different markets around the eurozone, including length of mortgage lending, for example, and having longer-term fixed rate mortgages in some jurisdictions and, atypically, non-interest costs in some jurisdictions. There are multiple reasons for the differences, but competition is evidently part of the reason that banks can charge higher interest rates in Ireland than those in other countries.

What we have done is to seek to address some of the fundamental issues affecting the functioning of the mortgage market, including trying to address the longer term mortgage arrears and trying to put in place a more resilient system, with business models as well as macroprudential rules to enhance the resilience of borrowers. We have sought to encourage and facilitate greater switching. We are doing some more work on the behavioural triggers that could be applied to facilitate a greater degree of switching. That will not only have an impact in terms of the individual borrowers but will help to drive greater competition into the market. Finally, we are seeing very nascent signs of potentially more competition coming into the mortgage market, not necessarily exclusively through the banking system.