Dáil Éireann Debate, Tuesday - 23 October 2012
149. Deputy Tom Fleming asked the Minister for Finance the reason the banks are allowed to continue to increase their variable mortgage rates at the same time as the European Central Bank reduces its own rates; if he will intervene on behalf of tax payers who bailed out the banks and on behalf of hard pressed households, many of whom are now finding it increasingly difficult to pay their mortgages; and if he will make a statement on the matter. [45934/12]
View answerThe Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank has no statutory role in the setting of interest rates by regulated entities apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. The lending institutions in Ireland are independent commercial entities. Ultimately the pricing of financial products, including, interest rates and products is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability, particularly where the cost of funding to each lending institution, including deposit pricing, is under pressure.
However, within its existing powers and through the use of suasion, the Central Bank will continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds. All mortgage lenders were written to and asked to consider the impact on arrears when considering any future interest rate increases.
Given the increased financial pressures currently being experienced by mortgage consumers, the Central Bank was of the view that they needed sufficient time to plan for any increases in their standard variable interest rate. The Central Bank advised mortgage lenders that it expects them to notify affected consumers, in writing, at least one month in advance of any increases in their standard variable rate. This notification must include:
a) The date from which the new rate will apply;
b) The details of the old and new rate;
c) The revised repayment amount; and
d) An invitation for the consumer to contact the lender if he/she anticipates difficulties meeting the higher repayments.
With regard to consumers in arrears or in danger of going into financial difficulty and/or concerned about going into mortgage arrears, the revised Code of Conduct on Mortgage Arrears (CCMA) offers increased protections to these consumers. The revised CCMA was issued to mortgage lenders on 6 December 2010 and is effective from 1 January 2011. It builds on the provisions of the previous version, but includes more detailed requirements, including the establishment of a formal Mortgage Arrears Resolution Process (MARP). Other examples of significant changes are:
- pre-arrears cases must be treated in accordance with the MARP;
- arrears have been defined;
- the primary residences which can be protected by the CCMA have been defined; and
- an Appeals process under the CCMA replaces the complaints process under the Consumer Protection Code.
The Central Bank has also published a guide for consumers on mortgage arrears ‘Mortgage Arrears – A Consumer Guide to Dealing with your Lender’ and this is available on the Central Bank website.
http://www.centralbank.ie/regulation/processes/consumer-protection-code/Documents/Consumer%20Booklet%20-%20FINAL%20Feb%202011.pdf
