Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I am conscious of the fact we have not had any announcement yet from the ECB on interest rates, but it is anticipated, or widely reported at least, that the ECB will raise interest rates by 0.75 of a percentage point today. I have to emphasise that, as we in this House all know, the European Central Bank is independent in its functions, does not take directions from this Government or any government and will make its decisions based on what it believes is the right thing to do for the economy in the round. I know that any increase in interest rates for mortgage holders will be very unwelcome. People who have tracker mortgages, in particular, will receive a third letter this year telling them their monthly repayments are going up. That is very much unwelcome for those of us who hold tracker mortgages. The ECB's rationale, however, as the Deputy will understand, will be that interest rates need to rise now to bring prices under control and to bring inflation down. That will be to the benefit of everyone. Ultimately, it is the remit of the European Central Bank to ensure we have price stability and that inflation is no higher than 2% per year. One of its tools is to increase interest rates; the other is quantitative tightening. It would appear the ECB intends to employ both those.

It is worth pointing out that we have had a prolonged period of very low interest rates for a long time now and that is now ending. We are likely to see interest rates closer to their long-term average in future. For example, as recently as 2014, not all that long ago, the average fixed interest rate for new lending was 4.1%; it is now 2.5%. That gives just an example of how low interest rates have gone. This prolonged period of low interest rates is not going to continue. We will see much more normal interest rates into the future. I know that will not be welcome for many people, but not telling people the truth should not be welcome either. It is important we tell people the truth about these things.

Any decision on variable rates, of course, is a commercial decision for the bank involved. I agree with the Deputy that banks should not use rising interest rates as an opportunity to make excessive profits, but they do need to take other factors into play as well. For example, we want banks to offer new mortgages to first-time buyers. We want them to offer those new mortgages at competitive rates. We want banks to offer long-term rates. Of course, many older people, who perhaps have some small savings, will be looking for an increase in their deposit rate. The banks have to take all of that into account. We cannot focus on just one group. That would not be fair. I agree with Deputy Doherty, however, that banks should not use this as an opportunity to make excessive profits.

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