Dr. Kieran McQuinn:

The whole issue of interest rate pass-through is quite complex in an Irish case. Obviously, it depends on the proportion of people on fixed, variable and tracker mortgages, because the trackers will be automatically hit and for the variable rate it depends on the policies of the individual banks concerned. We have a situation in Ireland where it has been complicated over the years. Our variable rates in the domestic market have been higher than what we have observed across Europe. There has always been a suspicion that the banks have a buffer there and they may actually use that buffer at this stage to soak up some of the policy rate increases, and there seems to be some evidence of that even in response to the original rate increase during the summer. Of course, with regard to how they fare going forward, if we have such a policy interest rate increase, they will almost certainly pass on some of it as far as the variable rates are concerned.

It is an additional cost in the market, and there is no doubt about that. The other thing I would say is that we need to be cognisant of the fact that it is an initial cost at a time when there are huge cost increases right across the board.

If we look at what is happening in the property market right now, we are seeing house price inflation of 15%, as we are all aware, and we have been seeing very high house price inflation over the past number of years. Interest rate increases are one way of calming the property market. There is no doubt about that from the evidence.