Mortgage rates increases in Ireland over the past year have been relatively modest in relation to the rise in ECB base rates. The large level of deposits in Irish banks (with very low interest paid) gives the Irish banks plenty of leeway for this which they wouldn't have if they had to raise capital in the market. Prize bonds are a competitor with banks for savings. No doubt the government know very well that any significant move of deposits from the banks to PBs will force banks to raise deposit rates, which in turn will feed into mortgage rates (and in case they are liable to forget the banks will have reminded them).
For purely selfish reasons I would like a bigger prize fund for the PBs. But at a social level I think it is better to keep it low if this helps limit mortgage increases. I would guess most PB holders have done very well for themselves from property inflation anyway, so a little social solidarity with the younger generation wouldn't go amiss.