Brian Cowen (Laois-Offaly, Fianna Fail)

As the Deputy will be aware, there is a broad range of factors that determine the effect of changes in interest rates on individual loan repayments. These include, for example, the outstanding loan amount, whether the lending rate is fixed or variable, the length of time over which the increase takes place, the pass-through of interest rate changes to lending rates, the repayment term and the specific nature of the financial product involved. My Department, having consulted the Central Bank, has concluded that, as detailed information relating to all these factors is not available, an accurate estimate of the figure requested by the Deputy cannot be constructed.

In reviewing the broad impact of any projected increases in interest rates on households and businesses, account must also be taken of private sector savings levels as any increase in interest rates will obviously have beneficial effects for savers. In addition, in assessing the overall financial position of both businesses and consumers following interest rate changes, it is too narrow an approach to consider the level of indebtedness in isolation from the asset side of the private sector's balance sheet. A high proportion of household indebtedness in Ireland relates to borrowing for house purchase which, in turn, creates an asset for households. In the same way, borrowing by the business sector underpins high investment levels and the creation of business assets yielding future income.

As far as the position of recently-formed families is concerned, the Central Bank's recently published Financial Stability Report concludes that fundamental factors, such as increasing employment and incomes, low inflation and interest rates, have underpinned the pattern of mortgage growth and associated debt levels in the economy. The maintenance of Ireland's strong economic performance and, in particular, its strong income and employment growth, provides a positive and supportive economic environment within which households can successfully manage their finances.

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