The Governor of the Central Bank has indicated that he is not in favour of legislation to force banks to cap variable mortgage interest rates.
Speaking in Cork today, Philip Lane said there were better ways of fostering competition in the marketplace.
Housing is not a one way bet, warns Central Bank Governor pic.twitter.com/OW2z2Swlop
— RTÉ Business (@RTEbusiness) February 23, 2017
Legislation, introduced by Fianna Fáil, is currently making its way through the Oireachtas that would give the Central Bank powers to intervene in the mortgage market.
Variable interest rates in Ireland are significantly higher than in the rest of the euro zone.
However, Governor Lane said if the legislation was passed, the Central Bank would implement the rules vigourously.
"We are advising that we think it would not be the first line of policy making to look for legislation as opposed to trying to do something deeper with the structure of the market," he said.
The Governor also defended the Central Bank's mortgage lending restrictions and warned potential house buyers that purchasing a home was not a one way bet.
He said the caps were introduced to make sure that house prices do not detach from the reality of people's incomes.
Professor Lane said that prospective housebuyers needed to carry out a risk assessment to make sure their loan is sustainable.
"There are many forces driving house prices at the moment, but there are also a lot of reasons why house prices could go into reverse," the Professor stated.
"There are a lot of downside forces facing the Irish economy. Anyone buying a home had better have enough of a deposit and make sure the loan is affordable to withstand downturns," he stated.
"Housing is not a one way bet and it would be a grave error for anyone to buy on the basis that house prices will only go in one direction. That is not true and there are many reasons why house prices could go into reverse in the coming years," the Central Bank Governor added.
