Dáil Éireann Debate, Tuesday - 30 April 2013
207. Deputy Joanna Tuffy asked the Minister for Finance his views regarding an increase in interest charges for homeowners who have variable mortgages with AIB, EBS and Haven; the effect that these increases will have on customers who are struggling to meet their mortgage repayments every month; if he will take steps to consult with the banks and building societies regarding this issue; and if he will make a statement on the matter. [20368/13]
View answerWhile the Government is acutely aware of the increasing financial stress that some households are facing in the current environment, ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial matter for the management and the Board of the Institution. As the Deputy will be aware the Relationship Framework with AIB provides that the State will not intervene in the day-to-day operations of the bank or their management decisions. This framework is published on the Department of Finance website. I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time. While this decision by AIB is regrettable it is strictly a commercial decision by the board of AIB and I understand that this increase now brings AIB in line with the market average. The standard variable rates charged by the Irish banks are significantly below the equivalent rates by banks in the rest of the euro area, even though many of these banks have far lower funding costs.
It must be remembered that in order to fund mortgages the bank must borrow at current wholesale and deposit rates which are currently higher than the ECB base rate and the bank must ensure that the rate it lends at is economically sustainable and provides a return for the bank and ultimately the State as its shareholder. It would not be fair for 2.1 million taxpayers to subsidise 138,000 owner occupier mortgages, especially when the vast majority of these mortgage holders can afford to pay their mortgages.
I understand that the Central Bank of Ireland pays attention to the effect of any increases in the standard variable rate, on mortgage arrears and would no doubt be concerned if banks were exacerbating their arrears problem and as such impairing their on-going viability, from such actions.
