Kathleen Lynch (Cork North Central, Labour)
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Question 114: To ask the Minister for Finance if his attention has been drawn to a report produced by a company (details supplied) which shows that Irish households are likely to become the most indebted in Europe by 2007; if he is satisfied that this level of debt and borrowing can be sustained; and if he will make a statement on the matter. [33053/05]

Jim O'Keeffe (Cork South West, Fine Gael)
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Question 162: To ask the Minister for Finance his views regarding the rising levels of personal debt. [33159/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 114 and 162 together.

I am aware of the report referred to by the Deputy and of concerns expressed in relation to the continued growth in credit, particularly to the household sector, and the possible effects of increasing indebtedness upon borrowers.

The Deputies may wish to note that the growth of credit and the associated increase in indebtedness are in the first instance a matter for the Central Bank and Financial Services Authority of Ireland, taking into account its role as a part of the European System of Central Banks and its functions, as the Irish Financial Services Regulatory Authority, in relation to the prudential supervision of financial institutions and the protection of the consumers of those firms.

While the report referred to highlights the increasing indebtedness of Irish households, it also highlights the fact that the sustainability of household debt is supported by strong demographics, low interest rates and a high savings ratio. This view is generally supported by the findings of the recently published Financial Stability Report from the Central Bank and Financial Services Authority. A key finding of the bank's report is that a range of fundamental factors such as growing employment and incomes, falling inflation and low interest rates have supported the pattern of mortgage growth and associated debt levels. The Central Bank's report does, however, highlight the continuation of strong mortgage credit growth as an important risk factor. It, therefore, emphasises the importance of responsible behaviour by both borrowers and lenders, to factor into their financial decision-making the prospective impact of potential changes in the future economic environment.

The Deputies may also wish to note that in the current environment of historically low interest rates, the level of private sector credit has been increasing strongly in a number of countries, including Ireland, and also other eurozone countries. In our case this is occurring in a context of strong economic growth and increasing employment. I reiterate the importance of borrowers acting sensibly and taking into account the prospect that interest rates will be higher in the medium term. I fully support the vigilance of the Central Bank and the financial regulator on the issue of personal credit and mortgage debt, and in reminding the lending institutions of the need for prudence on their part.