Vol. 508 No. 3
55 Mr. Gilmore asked the Minister for the Environment and Local Government if he has met the Central Bank regarding the home lending policies of banks and other financial institutions; if so, the outcome of the meeting; the action, if any, he will take arising from the meeting; and if he will make a statement on the matter. [18757/99]
I met with the Governor of the Central Bank on Thursday last, 30 September, regarding the issue of lending institutions' mortgage lending policies. I expressed my concern about recent publicity suggesting a loosening of credit standards in the mortgage lending area and the effect this could have on house price trends. My concern arises from the fact that any significant increase in mortgage credit could fuel renewed house price escalation and serve to undo the progress being made to restore balance to the housing market. Any relaxation of lending policies could also result in borrowers taking on commitments which they might not be able to meet in the event of an increase in mortgage interest rates.
The Governor confirmed that the Central Bank shares these concerns and assured me that the bank would continue to monitor lending practices closely to ensure that the highest standards continue to be observed. I understand that the Governor has written again to lending institutions seeking assurances that their lending policies continue to reflect the highest prudential standards. It was agreed with the Governor that officials of my Department and the Central Bank will meet regularly to continue to assess all developments in the area of mortgage lending.
What limits does the Minister think should apply to home loans? Will he tell the House what is the maximum loan a bank or building society should lend to a couple on a combined income of £45,000 where the principal income is £25,000 and the subsidiary income is £20,000?
I am not in the business of giving out mortgages and I will not be drawn into that matter.
The new Governor of the Central Bank.
I will not be drawn into that matter.
It is a simple question, not a draw.
I will not be drawn into answering such questions.
What limits does the Minister think should apply?
Can we hear the Minister, please? There is a very strict time limit on these questions.
The Minister has no opinion.
The practice agreed by the banks themselves some time ago and used as a guideline by them up to recently was two and a half times the principal earner's income plus the subsidiary earner's income. The reason I spoke to the Central Bank and made statements was that there appeared to be a loosening of those guidelines. In his second report, Mr. Peter Bacon made it clear that the idea of changing the lending criteria should not be considered until the levels of supply and demand were more equal. I agree with that view and the Central Bank also holds with it.
Does the Minister accept that if the criteria are applied, a couple with a combined income of £50,000 could not now obtain a loan to buy a starter home in the greater Dublin area? In relation to a report in The Irish Times on the date the Minister announced that he intends to introduce legislation if necessary—
Deputy, it is not in order to quote from material.
I am summarising.
This is Question Time.
I am summarising, a Cheann Comhairle. Does the Minister intend to introduce legislation to limit the amount banks and lending agencies can extend to home buyers?
The first step in dealing with the problem was to speak to the Central Bank.
Will the Minister answer the question? I asked him two questions and there is a time limit.
A Cheann Comhairle, could I have some protection? I am entitled to answer the question in whatever manner I see fit—
The Minister is not entitled to do so.
—as the Deputy is entitled to ask it.
The Minister is in possession.
On foot of the advertisement appearing in the paper, I had a meeting with the Governor of the Central Bank to establish whether the Central Bank approved of the loosening of credit arrangements as advertised, whether it stood over the statements the Central Bank and this Government had made and Government policy in relation to lending criteria and, if the bank's advertisement was in breach of that policy, to ask the Central Bank to exercise its prudential role in relation to mortgages and lending criteria. I am satisfied that will be sufficient, as an initial step. I have power under section 79 of the Central Bank Act to require every mortgage lender to submit information for the purposes of the national housing programme. If I believe the banks and financial institutions are moving away from established criteria in a significant way, I will pursue it under that Act.
The Minister answered neither of my supplementary questions. Will a couple with a combined income of £50,000 be able to obtain a loan, under the Minister's criteria, to buy a starter home in Dublin? Second, does the Minister intend to introduce legislation, as is reported? Direct answers, please.
The time for this question has now expired. We must proceed to Question No. 56.
I protest. The Minister answered neither of my questions.
The Chair has no option but to apply the time limits which the House agreed to and passed last week.
