Brian Cowen (Laois-Offaly, Fianna Fail)

The level of interest rates is determined by the independent European Central Bank, ECB, in fulfilment of its mandate to secure price stability for the euro area as a whole. The impact of ECB interest rate changes on household incomes in Ireland is an important element of the context for the Government's overall economic and fiscal strategy. This strategy has successfully delivered sustained economic growth, record levels of employment, low unemployment and rising incomes. It is has also underpinned the achievement of a strong and responsible fiscal position within which significant tax and expenditure priorities have been achieved. It enables us to plan the delivery of a major programme of investment in our economic and social infrastructure under the National Development Plan 2007-2013.

Households currently experiencing higher mortgage repayments on account of rising interest rates benefit significantly from a range of supportive economic and financial factors, including, for example, low income tax rates and a relatively high savings rate in respect of which savers are increasingly benefiting from higher retail interest rates. The Finance Act 2007 gives effect to those measures I announced on budget day that are designed to sustain our economic performance and improve both take-home pay and the affordability of housing. These measures include a doubling in the ceiling for mortgage interest relief for first-time buyers as well as increases in relief for other mortgage holders.

The sub-prime mortgage market in Ireland is small and exists to serve a need for mortgage finance by borrowers who experience difficulty in accessing finance from mainstream lenders owing to an adverse credit record or difficulties in verifying income. Sub-prime borrowers tend to refinance their mortgage in the standard mortgage market once they have restored their credit record. The Consumer Credit Act 1995 requires information on key aspects of mortgage lending to be provided to borrowers on a mandatory basis. This includes, in particular, information on the impact of an increase of 1% in interest rates in the first year of the mortgage.

The Financial Regulator's consumer director provides extensive information to help consumers make informed choices regarding mortgage products. The consumer director's cost surveys, consumer guides and fact sheets assist consumers in shopping around for the best available mortgage deal. Major efforts have been made to raise the level of awareness of the importance of responsible borrowing behaviour. Against the backdrop of the rising trend in interest rates, the Financial Regulator has published information for consumers on the potential impact of these increases on different mortgage products.

Mortgage interest rates in Ireland remain low by historic standards. This reflects both the current level of ECB rates, which are lower than those prevailing in either the United States or the United Kingdom, and the increasingly competitive nature of the Irish mortgage market which ensures that margins on mortgage lending remain low. I am confident the economic and fiscal framework now in place is properly aligned to the current requirements of the economy and can adjust to potential changes in the financial environment over time.

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