Wednesday, 10 February 2021

Questions (198)

Colm Burke

Question:

198. Deputy Colm Burke asked the Minister for Finance if his Department has examined the viability of proposals for existing loans in the banking system, particularly mortgage loans, to be refinanced at lower rates using cheaper funding from the European Central Bank; if so, if these proposals are viable; and if he will make a statement on the matter. [6561/21]

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Written answers (Question to Finance)

It is not clear what particular proposals the Deputy is referring to in his question; however, if the Deputy provides further information to identify the particular proposals the matter can be considered further.

In any event, the Deputy may wish to note that Irish banks substantially fund their mortgages and other loans by way of deposits raised from Irish households and firms, and that eurosystem funding forms only a relatively small share of their overall liabilities. Therefore, if a greater proportion of existing and new bank loans are to be funded by way of eurosystem funding this would reduce the need and demand for deposits as a source of bank funding. In terms of funding costs, while the eurosystem’s Targeted Longer-Term Refinancing Operations (TLTRO) programme provides funding at favourable rates to incentivise eligible lending, mortgage lending is not a type of eligible lending for this purpose (and in any event TLTRO funding is for a three year period which would not be an appropriate funding match for more long term mortgage lending purposes). More generally, it can be noted that the main refinancing operation has traditionally been the key ECB policy rate, and that this rate is currently set at 0%. As against this, it can be noted that the level of interest rates on household overnight deposits, which account for the largest share of household deposits, was only 0.03% in November 2020.

Questions Nos. 199 and 200 answered with Question No. 187.