Sir, - As the recent report of the Central Bank has reminded us, the ability of Irish authorities to influence interest rates has been drastically reduced. Particular concern has been expressed about those individuals whose substantial borrowings for house purchase has not only added more upward pressure on prices but also is likely to land such borrowers, and possibly their bankers, in great difficulty in the event of a sizeable interest rate rise.
While it seems to be difficult for the Government to take on many of the more politically-challenging steps that might be of greater help in alleviating the situation, there is a modest measure that might help. It involves granting mortgage interest tax relief only on new mortgages which have interest rates fixed for five years or more.
Such a measure would protect both banks and borrowers from their boom-time over-enthusiasm, reduce pressure on prices and create a market for fixed-rate mortgages that seems relatively underdeveloped in this country. While only marginal in its effect, this policy at least is unlikely to encounter any serious political opposition. - Yours, etc.,
Brendan O'Rourke, Faculty of Business, Dublin Institute of Technology, Dublin 2.