Professor Philip Lane:

Senator O'Donnell has raised several issues. This goes back to the interconnection between financial stability and consumer protection. As Senator O'Donnell has said, these rules have a double effect. Partly, they serve to protect the system in order that we avoid a crisis of the same type from recurring. Partly, they are in place to protect households. That is definitely part of our intention.

Credit rules are not about solving the affordability problem in this country. For people on typical incomes to be able to afford a reasonable home, the answer is all about expanding housing supply.

Senator O'Donnell pointed out the specific change in our rules that might affect a house costing €300,000 or €400,000. The change is rather small because it is only at the margin above €220,000 where the extra deposit was required. This is not a major change, especially in the context of a large fraction of people in that neighbourhood securing exemptions from the old rule. The old rule was complicated and had a wide exemption. Now, we have a new rule that is simpler. The borrowing limit is 90% but there are few exceptions. Only 5% of first-time buyers can get an exemption from that rule. Therefore, it is not the case that it is a material change that is driving the housing market. It is a simplification.

I repeat that the anchor of the system is a limit of three and a half times income. This means that when house prices go up, only people on high incomes are affording houses. That is why all the measures being worked on to increase supply represent the key to that.