As the Deputy is aware, I have taken steps to ensure that the banks provide options for mortgage holders to reduce their monthly repayments. Last May, I requested a report from the Central Bank on the topic, which I subsequently published. I also met the six main mortgage lenders in May and outlined my view that the standard variable rate being charged to Irish customers was too high. The banks agreed to review their rates and products and, by the beginning of July, to have simple options to reduce monthly mortgage payments for standard variable rate customers.
Last week, I concluded a series of follow-up meetings with these banks and the reality is that the majority have put options in place to allow borrowers reduce their repayments. As the Deputy will be aware, these options range from lower variable rates to new suites of variable rates based on loan to value, and reductions in fixed rates.
It is a matter for each individual borrower to decide what suits his or her circumstances. Borrowers should carefully consider that some fixed rates on offer are now substantially lower than the standard variable rate, SVR, and would result in savings for some customers. I therefore encourage borrowers to contact their bank to see what is available to them in their circumstances or consider moving to another bank if the offer is not satisfactory.
I also point out that lenders have not just reduced fixed rates. One lender reduced its SVR, for example, while another has embarked on a new pricing strategy based on property valuation. Banks have also put measures in place to attract new customers who might switch from existing borrowers. I asked the banks to provide options by which mortgage customers might reduce their monthly repayments and I believe options have been put in place.
The issue of regulating interest rates was the subject of two Private Members' Bills before the recess. Discussions on the Bills illustrated the unintended consequences which can arise when a Government intervenes in the market. As the Governor of the Central Bank said, in most advanced economies, including Ireland, it has long been understood that tight administrative control over the rates charged by banks would be counterproductive to ensuring a sufficient flow of properly priced credit on a lasting basis. Such control would strongly discourage new entrants. The Central Bank has not sought any power to regulate interest rates and I have made it clear that I would be willing to consider such regulation if the Central Bank requested it.
Additional information not given on the floor of the House
My Department and I exerted pressure on lenders by calling them in to discuss the issue twice and by reviewing the possibility of regulating interest rates or imposing a levy on the banks. Our opinion is that regulation would have negative consequences for customers in the long run and this position is supported by Central Bank and ESRI research. Competition represents the best long term solution to the problem. The Government made a commitment in the statement of Government priorities 2014 to 2016 to applying downward pressure on mortgage rates by increasing and supporting competition in the market and it will continue to work to fulfil that commitment.
