Dáil Éireann Debate, Wednesday - 16 January 2013
165. Deputy John Lyons asked the Minister for Finance the measures he has considered to regulate the mortgage interest rates being applied by certain lenders particularly sub prime lenders; if his attention has been drawn to the fact that borrowers form these lenders find it difficult to refinance their mortgages with other providers and so are trapped paying penalty rates; and if he will make a statement on the matter. [1534/13]
View answerThe Central Bank of Ireland 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 financial institutions, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. The mortgage interest rates that financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned. This interest rate is determined taking into account a broad range of factors, including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution’s overall funding.
However, as part of the Central Bank’s work on mortgage arrears, lenders were asked to consider all avenues to help customers in arrears, including interest rate reductions. This is particularly relevant to the sub-prime lenders who historically charge higher rates on higher risk loans. Currently, several lenders do consider a temporary interest rate reduction but this is on a case by case basis.
Lending institutions are independent commercial entities and, as such, it is a commercial decision for each lender to decide what loans they will provide or agree to have switched to them.
