Darragh O'Brien (Fianna Fail) | Oireachtas source

I commend Senators Barrett, Quinn and Crown on their introduction of the Bill. Senator Barrett, in particular, did much work in drafting the legislation. The Fianna Fáil Party fully supports the legislation, although I have a number of questions which I will raise presently. The Minister of State also raised a number of concerns in his somewhat disappointing contribution setting out the Government's response. The purpose of this debate is to have the Bill pass Second Stage in order that it can be tweaked or amended on Committee Stage by the Government, other parties or Independent Members. The Minister of State referred to the legality of aspects of the proposal, and I do not dispute the points he made in that regard. However, most of us agree that the Bill is a good idea. Rather than allowing the Bill to proceed to Committee Stage, the Government has instead chosen to allow it to die on the vine.

I will first address certain aspects of the Bill on which all sides agree. Many people will know Mr. Michael Dowling, the chairman of Mortgage Brain Ireland, from his role as a radio commentator. Mr. Dowling has stated that in his 25 years in the industry, he has never seen a more dysfunctional mortgage market. We all agree that profit and competition are the only things the banks understand. A vehicle such as the corporation proposed in the Bill - in other words, another lender in the market - would assist in this regard.

Senator Quinn outlined the substantial variations in the variable mortgage interest rates that the banks are charging customers and compared them with the rates at which lenders are borrowing money. AIB, for example, which is not the worst culprit in the variable mortgage market, raised a five-year bond of €750 million for lending purposes at a rate of 0.66%. The pillar banks and the small number of other banks operating here - namely, Ulster Bank and KBC - will not act unless there is competition in the market. Senator Barrett's Bill would introduce further competition to the market.I wish to ask about the point that Senator Barrett made. He mentioned the differences with transferring the functions of the Minister for Finance to the new agency or bank, and that they seem to be different from what the Canadian Act is doing. I am referring to the last paragraph of the Minister of State's script on page 6. It appears that what Senator Barrett is proposing would go further with this corporation in taking some of the functions from the Minister for Finance, and that it would be issuing loans on behalf of the Minister. It mentions giving the proposed corporation the power to exercise and perform all rights, powers and functions of the Minister for Finance under any contract entered into. I would be surprised if that were the case, but perhaps the Minister of State could clarify the position.

The Minister of State mentioned the Housing Finance Agency, and his colleague, the Minister of State, Deputy Coffey, has announced €300 million in new lending in that regard. The forecast for this year was about €4.2 billion in mortgage lending, but we will fall well short of that. Those figures are from Davy Stockbrokers. Up to the end of the first nine months of this year we have been at €3.2 billion for new mortgage lending. House building in Dublin is grinding to a halt now. The small amount that was being built is faltering. Fewer than 4,000 units have been built in Dublin, which is way below what is required, not to mention the rest of the country. One of the reasons for that concerns the new deposit rules that have been introduced by the Central Bank with the approval of the Government. They are too stringent, and I said so at the time. Prudence is required and a 10% deposit should be more than sufficient if one can prove ability to repay and not allow over 40% of net take-home pay as a maximum of what the mortgage payment is. We all know people in this position. I was talking to couples last night who are paying €1,400 or €1,500 per month in rent for a two-bedroom apartment, so there is no ability to save. A bank should be allowed to take into account a regular schedule of rent repayments, as was allowed under the local authority affordable housing scheme. Under that scheme, if one proved that one was renting for a certain amount on a regular basis it would effectively go towards a mortgage application.

A 15% deposit is required for mortgages up to €220,000 and it is 20% over that figure for first-time buyers, but it is unattainable for people. That is why 50% of all properties sold in Dublin city and county have been either to cash buyers or investors. The problem is that people cannot get into the market, so a whole generation is condemned to renting. Renting may be fine in some European countries and I hear people equating it with what happens in France, Spain and elsewhere, but it is different here. I am not getting into the whole Minister Kelly and Minister Noonan argument over rent certainty, which is not going to happen. It is a complicated issue but we do not have many institutional investors, as in the United States, who will sign 15 or 20-year leases with people. That is never going to happen here.

The reality is that most people do want to buy. However, even if professional couples, nurses or gardaí have the requisite salaries they cannot obtain a mortgage to buy a standard house in Dublin or most other parts of the country. That is because they have to come up with a deposit of €60,000 for a €300,000 house, not to mention furniture, realtor fees and solicitor's fees. It is impossible, so the market is not working. We regularly debate other issues, including homelessness and repossessions.

As regards the Minister of State's summation on page 7, I bet my own house that NAMA will not in 1 million years reach 20,000 houses delivered by 2020. No one believes that will happen. There is not a chance of it happening. Even now, NAMA is continuing to sell apartment blocks and houses en blocto investors for rental purposes. In my own area, 27 apartments were sold like that to an institutional investor. Therefore, people seeking to buy an apartment will have no chance of doing so. They should forget about it.

What Senator Barrett has proposed works in Canada. I would question the percentage figure for overall mortgage lending in Canada. He said it was only 1%, but is that on new mortgage lending or on the total book? It is probably the latter. I could be wrong but I cannot imagine that CAD $15 billion is 1% of the new mortgage lending in any given year. If he is equating that to 1% of the overall mortgage book, he is skewing the figures a bit.

There is a lot of good in what Senator Barrett has brought forward. I hope that the Minister for Finance will genuinely look at this because the market is not working. It will not work if we leave it to AIB and Bank of Ireland. I have a great deal of regard for the Minister, Deputy Noonan, but he is very pro-bank. He is their biggest cheerleader. I understand that profitability had to come back into the banking sector. I also understand that one needs a profitable institution for the taxpayer to get the money back from AIB, but look at what Bank of Ireland is doing. I have been talking about the restrictions on withdrawals but look at what Bank of Ireland has been doing to variable rate customers. AIB is not the worst culprit, but it is all profit for the banks and nothing for the punter. That is the problem unless the banks get real competition.

If this Bill was enacted and a corporation like this was established, we would see variable mortgage rates tumble because the banks would want a bit of that business. Competition and profit are what they understand. If they are losing profits and see a competitor who is eating their lunch, to use a famous phrase from the past, they will change. If they are allowed free rein, however, they will not do so. That is why this Bill is necessary. Senator Barrett and his staff have put an immense amount of work into producing a very comprehensive Bill. There is a lot of merit in it. I had hoped it would have been allowed through on Second Stage to show in a tangible way that the Government is willing to look at this. I know the Government is, because we all agree that the market is not working.

I commend Senator Barrett for bringing forward this legislation which has prompted our debate. I would welcome answers to the couple of questions I posed in order to obtain clarification.