Dáil Éireann Debate, Tuesday - 29 September 2015
144. Deputy Terence Flanagan asked the Minister for Finance his Department's plans to encourage competition in the banking sector and to drive down variable mortgage interest rates; and if he will make a statement on the matter. [32830/15]
View answerAs the Deputy will be aware, I have taken steps to ensure that banks provide real options for mortgage holders facing high repayments.
In May I met with senior management of the six main mortgage lenders and outlined my view that the interest rates being charged to Irish customers were 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 SVR customers.
I recently met the main lenders again and the reality is that the majority of the lenders have now put options in place to allow borrowers to reduce their monthly repayments.
I would 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, thereby fostering competition between the lenders.
Central Bank research suggests that 21% of existing PDH variable rate mortgage customers could save by switching their provider. I expect that if financial institutions are convinced that there is a threat that they will lose existing customers, they will reduce the rates that they currently charge such customers.
Competition is the best way to achieve a sustainable long term solution to the issue of high mortgage repayments and the Government has undertaken a number of initiatives in order to promote competition in the market. For example, it introduced the changes to Section 149 of the Consumer Credit Act 1995 in the Central Bank (Supervision and Enforcement Act) 2013 for new entrants. This section regulates fees and charges and the changes mean that it does not apply for the first three years of operation of new entrants to the Irish banking sector. It is anticipated that new entrants will enter the mortgage market and bring welcome competition to this sector.
