Dáil Éireann Debate, Tuesday - 7 March 2017
147. Deputy Ruth Coppinger asked the Minister for Finance the measures he will take to reduce the interest rates being charged by the so-called subprime mortgage lenders; and if he will make a statement on the matter. [11218/17]
View answerThe issue of mortgage rates is a significant one for this Government. The Programme for a Partnership Government sets out a number of important and practical measures which can be taken to improve the position of mortgagors and in particular variable rate mortgage holders. Firstly, it wishes to promote competition in the supply of mortgage finance. To that end, the Competition and Consumer Protection Commission (CCPC) has been asked to work with the Central Bank to set out options for Government in terms of market structure, legislation and regulation to lower the cost of secured mortgage lending and to improve the degree of competition and consumer protection. The CCPC has now commenced this work, with a public consultation phase closing on 20 March 2017 and the CCPC will then produce a final report by the end of May 2017.
Secondly, the Government considers that measures to encourage and promote a greater level of switching in the mortgage market would also help boost the level of competition in the market for existing mortgages. In particular, the Programme for Government considers that the development of a code of conduct for switching mortgage provider would be a useful and practical initiative which would have the potential to deliver savings to many existing mortgage holders. To that end, the Central Bank has commenced a programme of further research on this topic and the Bank has indicated that the output of this work will be used to inform its consideration of the need for any future work in the area of mortgage switching and specifically around the need for a mortgage switching code. However, Central Bank research has already shown the scope for borrowers to save money by switching mortgages and the CCPC has launched a mortgage switching tool to assist consumers (which itself notes the findings of the Central Bank research of cases where borrowers could make savings). In conjunction with this, my Department has also launched a media campaign to raise awareness and promote consumer switching in the retail financial product area, including mortgages. This initiative was funded in its entirety by AIB and Permanenttsb as was agreed in the context of both banks restructuring plans. The campaign website www.switchyourbank.ie provides straightforward practical information and support on switching and I would strongly encourage people to visit it.
While the Central Bank does not have a statutory role in relation to prescribing the rates that mortgage lenders charge on their loans, the Bank does require that all mortgages are advertised and sold in accordance with the requirements of financial services legislation (including Central Bank Codes), and that consumers who choose a given mortgage product (or to switch to a new product) are treated in accordance with these requirements in the context of the product they have chosen. Also, it could be noted that when it appeared before the Joint Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach on 8 December last, the Central Bank indicated that it had not seen any sign of interest rates on mortgages being increased by entities which acquired loans from lenders which initially provided the mortgage.
In overall terms, the Government is of the opinion that increased competition rather than administrative controls is the best way to ensure that retail lending rates are driven down in a sustainable way for the market as a whole but without giving rise to potentially undesirable consequences for the provision of new mortgage lending. This is a policy area that the Government will keep under active review in its ongoing engagement with mortgage lenders and in implementing the Programme for Government commitments to help deliver on a long term basis better outcomes for all mortgage borrowers.
