Mr. Mark Cassidy:

This is an important link. It is the link between the key indicators of economic performance, the degree of credit risk in the economy and the borrowing rates the banks are charging. We are suggesting that there is a link between credit risk and lending rates in the economy. It is certainly the case that the key indicators of credit risk have been improving in recent years. In particular, I wish to highlight the indicators of household indebtedness, the numbers of households in negative equity, the amount of arrears in the economy and the unemployment rate.

The rate of household indebtedness has fallen from 200% of household disposable income in 2012, which was the worst position, to approximately 150%. This is a material improvement. The trend is continuing in the right direction. However, this rate remains the fourth highest in the European Union. Negative equity is where the value of the loan is greater than the value of the house. Some 40% of all loans were in negative equity at the end of 2012. The figure is now down to 15%. This is still an extremely high number. The current trend of house price increases and amortisation mortgages suggests that this will continue to reduce significantly in future years. The trends in arrears have been mentioned already. In value terms, they have declined from approximately 17% at the peak in 2013 to approximately 11.5% now. Unemployment is a particularly important indicator. Unemployment has fallen from 15% at the end of 2011 and is now at 8%. We expect the rate to continue to fall. Let us put this change in context. When we had numbers close to full employment, unemployment fell to approximately 4%.

The overall situation is that all these indicators have been improving. This has coincided with the reduction in interest rates and lending rates during the past two years. It has also coincided with more competition, because as household indebtedness falls and as households come out of negative equity, they are in more of a position to switch mortgages either within the same institution or a different institution. All these indicators remain particularly high by European standards. We are still in a riskier position than other European countries.