Sir, - A front-page report (The Irish Times, November 7th) stated that the Central Bank would be required to defer further interest rate cuts because of the continuing boom in mortgage borrowing.
There is no need for the Central Bank to penalise the rest of the economy with unnecessarily high interest-rates simply because the housing market is buoyant. Instead, the bank should exercise its regulatory authority over lenders and the banking system to dampen demand for mortgages. One approach would be to immediately require mortgage lenders to secure a 20 per cent cash down-payment toward the purchase price of a home. If demand for mortgages does not begin to decline within three months, the down-payment should be raised to 25 per cent, and so on.
Such a policy would reduce demand for new mortgages; ensure that people who do secure mortgages will not walk away from properties when the next recession comes; allow the Central Bank to reduce interest rates; and begin to give the Central Bank some practice in regulating Ireland's macro-economy in a post-European Monetary Union world, in which the power to control interest rates will reside with the European Central Bank, not the Irish Central Bank. - Yours, etc.,
Thomas F. Reed, Ph.D.,
Managing Director, Morningside Capital Management, Killaloe, Co Clare.