Noel Ahern (Dublin North West, Fianna Fail)

This matter, as well as the other comments made on house prices in recent days, arise mainly from a press release by Permanent TSB, the special tenth anniversary edition of the Permanent TSB-ESRI house price index. This has the appearance of a rather contrived piece of publicity, given that the first issue of the index was only published in July 1998, even if it contained backdated figures to 1996. The launch of an affordability index by EBS also generated a lot of publicity, even though the affordability figures turned out to be well within the criteria applied by lending institutions themselves.

It is ironic that an institution such as Permanent TSB is eager to dramatise house price increases. Last year, when I voiced concern about the likely impact on house prices of increased lending and 100% mortgages, Permanent TSB responded by pointing out that the rate of house price growth had been moderating, which was the case until then, and stated that it believed the introduction of 100% mortgages would not have any impact on moderation or in any way contribute to house price inflation. Few now agree with that prediction and statistics do not give any credence to it. In a recent quarterly bulletin, the Central Bank noted that the gradual acceleration in house price inflation since last autumn had coincided with some easing of credit conditions. The bank stated that this seemed, at least in part, to reflect an increased effort on the part of mortgage lenders to market new products, specifically, 100% mortgages.

The Central Bank's comments are helpful and I hope they will promote a more restrained approach than the presentation made by a Permanent TSB representative at a conference earlier this year which proclaimed the merits of 100% mortgages, interest-only mortgages, 40-year mortgage terms, the inclusion of room rental potential in income assessment and, as a more radical solution for the future, the prospect of intergenerational mortgages.

Many financial institutions have hyped up the price of houses over the past year. My belief that it is time for more sanity in the mortgage lending area broadly accords with the sentiments expressed yesterday by the President of the European Central Bank. We could do with much less hype in the housing market and an end to scaremongering about the inability of first-time buyers to gain a foothold in the market. This is important because price expectations have an important influence on the market. A certain amount of damage has been done by hype and overly aggressive marketing. Some people have been stampeded into buying sooner than may be necessary, putting first-time buyers into competition with each other and stretching buyers' borrowing to the limit of what may be prudent.

It would be foolish to ignore the potential implications of excessive lending at individual and macro levels for house prices, which are determined not only by the numbers seeking houses but also by the volume of available funds. While easier credit may seem a panacea for some individuals in the short term, the overall impact on market prices and the long-term implications in terms of personal debt are not likely to be favourable. If things go wrong, the Government can always be blamed. The figures quoted by PTSB do not show the full picture. They are based purely on PTSB's lending and relate to a mixture of new and second hand houses. My Department's statistics, based on returns from all mortgage lending institutions, show that the rate of increase for new houses nationally was a good deal less, 210%. Prices in Dublin have also been skewed by a number of high profile and highly priced new developments, while second-hand prices are often inflated by demand for houses with potential development sites attached, as well as scarcity in highly sought after areas. Typical first-time buyer prices are a good deal lower than the overall average — on average approximately 13% less and lower in some cases. In Deputy Crowe's constituency affordable housing has been put on sale at €142,000 for a two bedroom house and €172,000 for a three bedroom house.

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