An effective monopoly in the banking market here is the reason mortgage costs are double the level elsewhere in the eurozone, European Central Bank chief Mario Draghi has told the Oireachtas Finance Committee.
In a session tinged with anger from some TDs over the ECB's role in the financial crisis here, Mr Draghi said the EU and the bank would "stand behind" Dublin in the event of turmoil from Brexit although he said he believed there would be a "gradual transition" out of the bloc for the UK.
Pressed by Fianna Fáil's Michael McGrath on the cost of mortgages - which carry an interest rate of 3.15pc versus an average of 1.77pc in the eurozone - Mr Draghi said Europe needed to pass legislation to allow financial services companies to work across borders.
"The big limit here is the presence of a monopoly," he said. "The answer there is (more) competition."
The market is dominated by AIB and Bank of Ireland, which control 60pc of new mortgage lending.
On a rare visit to Dublin, Mr Draghi stressed that the historical and current level of defaults in the Irish system were materially higher than most other eurozone countries which had also pushed up costs.
Mr Draghi's comments come amid a push by AIB to lift a cap on banker bonuses and on the heels of a scandal of tracker mortgage mis-selling.
The ECB President, whose term ends next year, brushed off criticism of the ECB's role in Ireland's economic crisis, which critics say pushed the cost of the financial sector's failure onto the taxpayer, saying the economy had rebounded strongly.
"The ECB was not entirely negative, things are going well today," Mr Draghi noted wryly, after saying it was time to "mend a relationship" that has been fraught.
The hostile tone from some on the committee reflects the view that the ECB effectively forced Dublin into a €67bn bailout from international creditors by threatening to cut off access to its lines of emergency credit.
He termed the access given to Ireland at the height of the crisis as "unprecedented".
Ireland is growing at the fastest pace of any euro area country and unemployment has fallen sharply, causing wages to rise here.
He noted Ireland's strong support for both the European Union and for the euro, saying "Europe has to repay this trust" and support the country in the transition to Britain's exit from the EU in the event of financial market instability.
Irish exporters are exposed to the impact of changes in the value of the pound and the sheer size of the UK market.
There is also a risk of financial contagion due to the close links between the two countries' banking systems. Mr Draghi believed however that the risks could be managed. "The EU will stand behind Ireland," he told the committee.
Pressed on whether the ECB's plans to end its bond-buying programme, which has kept yields low, and the eventual move to higher interest rates would increase the State's debt costs and the burden on consumers, Mr Draghi said that even after that the euro area's monetary policy would remain supportive. He declined to comment on the Government's budget plans, although he sounded a warning on the State's over-reliance on tax revenues from a handful of mostly American multinationals, saying it presented a risk.