Low Irish deposit rates have long been a topic of concern for both savers and the wider economy as a whole. But according to Gabriel Makhlouf, the governor of the Central Bank of Ireland, there is a lesser-known consequence of these low rates, and it has to do with the country’s mortgage market. In a recent interview, Makhlouf suggested that mortgage holders in Ireland are effectively being “subsidised” by those who save money in banks, because the low deposit rates allow for cheaper borrowing costs. This revelation sheds new light on the complex factors at play in Ireland’s financial landscape, and suggests there may be more consequences to low deposit rates than previously understood.
Central Bank Governor Gabriel Makhouf has stated that low deposit rates offered by Irish banks are indirectly “subsidising” mortgage holders. This comes at a time when lenders are already earning €1.8 billion annually in interest on excess cash placed with the regulator. Speaking to the Dáil Committee of Public Accounts, Makhlouf added that banks’ deposit and loan rates are “commercial decisions” and that the Central Bank doesn’t have the power to suggest otherwise. It was further revealed that the current average rate on household overnight deposits is just 0.03%, compared to the average rate on new Irish mortgages of 2.92% in February. Meanwhile, PwC has paid €54 million to the State’s Insurance Compensation Fund in order to settle a legal claim over the collapse of Quinn Insurance.
In conclusion, Governor Gabriel Makhlouf’s statements about Low Irish deposit rates ‘subsidising’ mortgage holders have certainly stirred up a debate. While some argue that it is an unfair and unjust way to allocate resources, others believe that it is a necessary measure to support a struggling housing market. Makhlouf’s comments shed light on the complex and multidimensional issues that the Irish economy faces, and it remains to be seen how policymakers will address these challenges in the future. Nevertheless, it is clear that more needs to be done to ensure a fair and equitable distribution of resources across all sectors of society.
