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Ireland’s Central Bank Governor Addresses Mortgage Cross-Subsidisation Amid Low Deposit Rates: A Dáil Committee Insight

The Governor of the Central Bank, Gabriel Makhouf, indicated that the low interest rates paid by Irish banks on customer deposits effectively support mortgage holders. This comes as lenders are generating a yearly €1.8 billion in interest from surplus cash held with the regulatory body. While addressing the Dáil Committee of Public Accounts, Makhouf emphasised that the interest rates on deposits and loans set by banks are based on their business choices. He dismissed the idea of the Central Bank intervening in the minimal returns offered to savers. Makhouf reiterated the Central Bank’s stance against intervening in the interest rates banks pay or charge, suggesting that one consequence of banks’ decisions is the cross-subsidisation between deposit and mortgage rates. Despite having higher deposit-to-loan ratios compared to their European counterparts, Irish banks have lagged behind in increasing deposit rates since the European Central Bank (ECB) moved away from its negative rate policy in the previous year.