(Cavan-Monaghan): Section 2 enables the Minister, with the consent of the Minister for Finance, subject to regulations, to pay a subsidy to a building society in respect of interest payable to the building society as regards any period commencing on or after June 1977. What is said there is that the Minister can, if he gets the consent of the Minister for Finance, pay a subsidy to a building society in order to enable that building society to reduce or keep down the rate of interest which it charges to borrowers from it. Subsection (2) provides that in determining the amount of a subsidy paid to a society under this section regard may be had to all or any one or more of the following paragraphs:
(a) the amount of interest payable by borrowers on loans made to them by the society,
(b) the amount of interest payable by the society to shareholders in or depositors with the society,
(c) such other matters (if any) as stand for the time being prescribed under this subsection.
We know the Minister, his predecessor or the Government authorised or paid a subsidy to building societies in order to keep the lending rate down to its present record rate, I think, of 14.1 per cent. The section we are now dealing with will validate that subsidy which has already been paid by the Minister to the building societies. It is clear from speeches and statements made by the Minister that he considers the present building society rate of 14.1 per cent too high. The Minister thinks that the rate which building societies are charging at the moment is excessive and should be reduced. It is beyond the capacity of the public to pay this.
The number of loans paid by the building societies in 1980 has decreased in comparison with 1979. Building societies granted 1,215 loans for the month of October 1980 but for the same month in 1979 the five big building societies advanced 1,730 loans. That means that about 500 more loans were advanced by the building societies in October 1979 than in October 1980. The amount necessary to build a house is increasing substantially, if we are to take the amount of the loans made by building societies into account. The average loan paid out by building societies in October 1980 was £17,098 as compared with £14,567 in January 1980. That is a substantial increase. It is not unreasonable to suggest that that indicates that the price of houses and the cost of house building increased substantially between January and October of this year.
I fully agree with the Minister that an interest rate of 14.15 per cent is far too high and is beyond the capacity of the borrowing public to pay. It is not for me to say whether the building societies should take down their interest rates. They say that the inflow of investment money to them in October is about the same as in the previous month. That is something between the Minister and the building societies. It is significant that at the very first opportunity the Minister got he cut off the subsidy to the building societies when he could have left it there and brought down the interest rate, which he obviously thinks should be done.
The building societies should bring down their interest rate if they possibly can, but if the effect is to diminish the amount of money they have to lend to borrowers that is not a solution. I would like the Minister to avail of this opportunity to give the House an undertaking that he will restore the subsidy in order to reduce the lending rate of 14.15 per cent. If, having explored the possibility of getting the building societies to reduce their lending rate, he is satisfied that it would not be in the interests of the borrowing public or house builders for them to do so, we would be 100 per cent with the Minister. I believe it is clear from all the public statements of the Minister recently that he is satisfied beyond doubt that the interest rate of 14.15 per cent is too high. I would like to hear from the Minister what he proposes to do about this.
