Deputy Fitzpatrick and Deputy Tully suggested in their contributions that the present mortgage rate should be subsidised by the Government. Let me remind the House how the subsidy which this Bill provides for came about.
Arising from a proposal by the Irish Building Societies Association in April this year to recommend to their members an immediate increase in their mortgage and interest rates, the Government decided, on foot of a report by a working group set up to examine the matter, to subsidise the interest rates by 1.75 per cent. The circumstances obtaining at the time were that inflows to societies were at such a low level that the Government accepted that there was justification for an immediate increase in the investment rate to enable societies to retain even their existing funds, not to mention attract new funds.
The Government's action had the effect of pegging the mortgage interest rate at 14.5 per cent. Without a subsidy all mortgagees would have had to pay 16.5 per cent. Subsequent reductions in interest rates generally and a substantial increase in the inflow to societies in the months July to September made it possible for the subsidy to be terminated with effect from 1 October. The high rate of inflow has continued throughout October and the early part of this month. The Deputies are now suggesting that the mortgage interest rate should be reduced by way of a further subsidy. I agree that the rate should be reduced but I do not agree that that should be brought about by an injection of public money into societies. The circumstances applying now are quite different from those which applied when the subsidy was introduced as is evidenced by the very high inflow of funds to societies in recent months and the continued general downward trend in the interest rates of other investment agencies.
Deputies are aware that I have urged strongly on societies to effect a reduction without delay in their mortgage interest rates, in view of the present healthy state of their net inflows and in view of the discrepancy between their present interest rates and those of other financial institutions. In these circumstances it makes little sense to talk of a further Government subsidy. The societies' representatives for their part have undertaken to consider these points at their next council meeting in early December and to inform me without delay of the outcome. Societies have been made aware that the Government will have to give serious consideration to failure on their part to respond in a positive manner to the Government's request for a reduction in their interest rates. I was interested to hear a representative of the societies' association on the radio on Sunday indicating that they would respond to the Government's initiative in this matter at an early date. I hope that it will be an early date.