asked the Minister for the Environment if, in view of the recent reduction in bank interest rates, the action he proposes to take to ensure that the building societies will reduce their rate of interest, in the interest of borrowers; and if he will make a statement on the matter, in particular the failure of building societies to respond to the latest market movements.
Ceisteanna—Questions. Oral Answers. - Building Societies.
2.
A 1 per cent reduction in the building societies' mortgage rates takes effect from 1 June for new borrowers and will take effect from 1 July for existing borrowers. In common with mortgage holders, aspiring home owners and the construction industry, I welcome this reduction, which was announced following discussions between the societies and myself.
Will the Minister agree in view of the fact that the rate of inflation is so low it can no longer be justified that the building societies should continue to charge rates of interest which existed when the rate of inflation was about 20 per cent? Will he agree that his consultations should be extended to include representatives of mortgage holders when he is considering what action should be taken against the building societies for the excessive rates of interest which they are now charging?
I agree that the Government's economic programme is creating the right atmosphere for the reduction in interest rates, and that includes mortgage rates, and it is hoped that pattern will continue over the months to come. We look forward to further reductions in mortgage interest rates in the not too distant future. I am pleased the Deputy opposite supports the point of view outlined in my reply.
Is the Minister satisfied that a reduction of 1 per cent is adequate in the circumstances at present?
While we would all like to see greater reductions at all times, a reduction of 1 per cent was the most that could be expected at this time. I regard it as a very positive step. Certainly, from my investigations a reduction of 1 per cent is the most that could have been expected but we look forward to further decreases.
Is the Minister saying he accepts that the major element of the increase which the societies imposed some months ago was justified?
In the circumstances that existed when the Deputy was Minister perhaps there was some reason for the movement in one direction. The Deputy will be happy to know that a new air of confidence exists in the economy and that good relations exist between the building societies and myself. They have been most forthcoming and are prepared to co-operate in every way.
Were any assurances given to the societies at that meeting or meetings or privately which invoked an air of confidence and co-operation on their part resulting in a 1 per cent reduction in mortgage rates? Was the Minister for Finance informed of any such assurances?
The matter did not arise. Any meetings I had with the societies were well known to Deputies and the media. There have not been any other meetings held and no assurances, like the Deputy is implying, arose or will arise. The Minister for Finance is aware of all matters concerned with development in the building societies.
I should like to ask the Minister if, in relation to the prospects of a disclosure of deposits with building societies, any assurance was given by the Minister which would lead the societies to anticipate a more benign régime than they might have anticipated from any other administration?
I do not know what the Deputy is getting at as that matter does not arise on this question. However, I have signalled that new legislation in regard to building society development will be forthcoming and I hope it will be possible to conclude a package before the end of this year following the discussions taking place in the working party which I set up and which are going very well.
From the reply to my earlier supplementary question, are we to take it the Minister is suggesting that there were reasons, other than financial, which prompted the building societies to impose an increase some months ago?
No, I am not suggesting anything of the sort. I do not think relationships between the Deputy and the building societies were too good for a period of his term in office——
For a very good reason.
It is in the best interests of everyone that good relations have been restored between my office and the building societies.
Is the Minister suggesting that the increase imposed by the societies was not merited by their financial circumstances at the time?
I did not say that. Do not try to put words in my mouth.
What is the Minister talking about?
The decrease in the mortgage interest rates has been welcomed by everyone and I should like to think the Deputy also welcomes it.
Does the Minister accept that the decrease is sufficient?
I am looking forward to further decreases.
Does the Minister accept that it was not sufficient?
It could never be sufficient.