Dáil Éireann Debate, Thursday - 28 February 2013
8. Deputy Robert Troy asked the Minister for Finance his views on whether it would help labour market mobility and the overall health of the economy if the covered banks were to allow borrowers who are moving home to be able to keep their tracker mortgage rate; and if he will make a statement on the matter. [10624/13]
View answerFirst, I must confirm to the Deputy that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities. It is not appropriate for me, as Minister for Finance, to comment on or become involved in the detailed mortgage position of mortgage holders. In regard to the query posed by the Deputy, information is not readily available on the effect on the labour market and on the economy generally of allowing borrowers who are moving house to avail of job opportunities to retain the benefits of a tracker mortgage.
It is important to point out that addressing unemployment remains the main priority of the Government and budget 2013 contained several measures aimed at addressing this issue. In particular, the additional supports introduced for the SME sector are intended to complement the work undertaken by the Department of Jobs, Enterprise and Innovation in respect of the Action Plan for Jobs and to encourage job creation. The recently released Action Plan for Jobs 2013, building on the work of the 2012 plan, contains a number of measures aimed at supporting job creation and tackling the unacceptably high levels of unemployment. The JobsPlus initiative, for example, which targets long-term unemployment, will provide an incentive to businesses to hire those who have been on the live register for 12 months or more by providing a cash flow benefit to businesses based on the duration of unemployment.
As the Deputy may be aware, unemployment, while still at an elevated level, has shown some signs of stabilising in recent months, with the standardised unemployment rate static at 14.1% for the past three months, having fallen from 15% in February 2012. The number of individuals on the live register, seasonally adjusted, has been in decline since June of 2012.
The latest data from the Quarterly National Household Survey showed an annual increase in employment in the fourth quarter, the first such increase since the second quarter of 2008. Employment in the private sector seems to have stabilised, having increased by 0.6% in 2012. A modest increase in employment of 0.2% is forecast for this year, reflecting further employment growth in the exporting sectors, as well as the positive impact of various labour market initiatives. However, the unemployment rate is expected to remain elevated over the medium term, decreasing to 13.1% in 2015 as an increase in labour market supply mitigates the impact of a pick up in employment over the period.
This question relates to tracker mortgages. There is a real issue here. Having a tracker rate is enormously valuable to a mortgage holder. They could be paying 1.5% or 1.75% interest as opposed to somebody on a variable rate paying 4% or 4.5%. This makes a massive difference to the monthly mortgage payment they have to make. They are trapped where they are because even people with borrowing capacity will not move because they will lose their tracker which they simply cannot afford to lose. There should be a policy initiative that would allow people to keep their tracker on that portion of the mortgage so if they currently owe €100,000 to the bank and borrow an extra €100,000 to move to a bigger property, they will keep the tracker on the original portion. It would generate movement and activity. Young families are living in apartments on a tracker rate and are absolutely trapped. Even if they are on good incomes and want to move, they cannot afford to because they would lose the tracker. This is something that is not possible for most people.
The question related to doing what Deputy McGrath suggested for people who are moving quite a distance from their own locality to get a job so it was not just moving from an apartment to a house in the same locality. There are many considerations before people move, such as children in school and proximity to relatives. There is a case to be made but I suppose the Deputy knows why the banks are unwilling to concede to this. They are losing money on all trackers because the interest rate is so low and they would like to be rid of them. If somebody decides to move house and has to take out a new loan, they will take out one with a variable interest rate. It is very difficult to tell the banks they should not do this because trackers are loss makers. Perhaps there is some via media the banks should look at.
Under the proposal I am suggesting, the banks would be no worse off because the mortgage holder would just keep the tracker on that portion of the mortgage. Obviously, the balance of the new mortgage would move to a variable rate. That is the key issue. There is no doubt that it would be healthy for the economy and generate movement and activity. It is something that should be looked at. Obviously, trackers are a big problem for the banks but if what I am suggesting was implemented, they would be no worse off and the economy and the families would definitely be better off.
This issue needs to be looked at in the round. I appreciate that they are loss making but if an individual is willing to take out a bigger loan with a bank and a portion of that loan will have a variable interest rate, which is a financial gain for the bank, it makes sense for the bank to facilitate that move. It makes complete sense for the bank because it will be in a healthier position as a result.
Does the Minister have any information about the number of people whose mortgages have been restructured and who were on trackers but are no longer on them? There is a great fear that the banks have been encouraging people off trackers.
I do not have any information on that. I can see the point the Deputies are making. On some suitable occasion, I will feed their suggestions into the banking system but so far, I know the answer I will get unless there is a change of policy. If we could construct it as a labour market initiative, we might get further with it. I will pass on the Deputies' suggestions.
