Dr. Robert Kelly:

I think the Deputy is speaking to how individual retail banks are setting their operations up. I cannot speak for how an individual retail bank makes its decision on credit. It is up to the banks how to structure themselves. Maybe they can answer some of the questions on the pros and cons of different models they have adopted. Whether they decentralise or centralise them, I am sure there are pros and cons to how those are thought of and done most effectively.

I can certainly talk about the mortgage point. This has to be considered in the context of what we have seen with interest rates over the last while. We always thought we had an issue with switching and value for customers coming into this. When we saw interest rate rises and people’s expectations of interest rate increases rising, we saw many people fixing, changing their product and moving bank to get better products. In the mortgage market, we have seen an increase in new net credit going out through different products. What we have seen since then, as one would expect in a higher rate cycle, is fewer second and subsequent buyers moving around the housing system, but the first-time buyer credit continues to rise. We are continuing to see growth in terms of first-time buyer credit. There are individual circumstances here and of course we have the macroprudential measures, but they are well-meaning in terms of understanding how we put guardrails around overall lending. On the Deputy’s point, there were issues almost 20 years ago when those guardrails were not in place. They are there to protect all customers and us, especially as we face into affordability challenges like now. Credit being the answer to those affordability challenges is a problem down the line. It is not the answer. We are continuing to see growth in the numbers for sustainable credit, where people meet credit standards and can cover the cost of what they are taking on in a sustainable way.

The biggest blocker to further growth is actually new homes being produced. The quantity of transactions is just not there. Every time we look at new data coming out on the number of houses for sale on various websites, we see increasingly constrained numbers. This is starting to act as a natural blocker on how much the first-time buyer market can grow. One then gets into tenureship, and I will not go any further there. Certain things we see are features of the housing market and others are features of banking. Overall, we are seeing growth, with new people coming into the system, to the firms we have just talked. It is more diversified. It is also more diversified for first-time buyers. They have competition driven by non-bank lenders within the system and we have the main pillar banks. It is a more diversified base than we had five or ten years ago.