Dáil Éireann Debate, Tuesday - 22 February 2022
58. Deputy Ged Nash asked the Minister for Finance his plans to protect current and prospective mortgage holders from a rise in European Central Bank interest rates; his views on the introduction of maximum interest rates that can be contracted to each type of credit agreement as applied in some other European Union countries; and if he will make a statement on the matter. [9485/22]
View answerThe price lenders charge for their loans is a commercial matter for individual lenders. As Minister for Finance I cannot determine the lending policies of individual banks including the interest rates they charge for loans including mortgages.
Despite this, it should be noted that recent trends indicate that certain mortgage rates have been falling in Ireland. For example, the interest rates on new mortgages (excluding renegotiations) have fallen from 4.05% in December 2014 to 2.69% in December 2021.
The weighted average interest rate on new fixed rate mortgage agreements stood at 2.59% in December 2021, down from a series high of 4.11% in December 2014. There has also been a reduction in the interest rates charged on loans to SMEs and consumers over the same period.
The Central Bank also introduced of a number of increased protections for variable rate mortgage holders. The enhanced measures, which are provided for in an Addendum to the Consumer Protection Code 2012, and became effective in February 2017, require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase. The measures also improve the level of information required to be provided to borrowers on variable rates about other mortgage products their lender provides which could provide savings for the borrower and signpost the borrower to the CCPC’s mortgage switching tool.
In addition, the Central Bank introduced changes to the Consumer Protection Code 2012 in June 2018 to help consumers make savings on their mortgage repayments, provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework. The new and enhanced requirements took effect from January 2019.
In relation to the introduction of maximum interest rates that can be contracted to each type of credit agreement as applied in some other European Union countries, the Deputy should be aware that the Government intends to introduce shortly a Bill to cap interest rates from providers of moneylending agreements. In addition, the Government's Consumer Protection (Regulation of Retail Credit and Credit Servicing Firms) Bill 2021, which is commencing Committee Stage this week, will put an existing APR cap of 23% for consumer lending on a solid statutory basis. This 23% APR cap will also apply to hire-purchase agreements.
Both these Bills, together with the existing interest rate cap on credit union credit, anticipate a draft provision in the European Commission's proposal for a Directive of the European Parliament and of the Council on consumer credits, which was published last June. The provision in question will require Member States to introduce caps on interest rates, annual percentage rate of charge and/or the total cost of credit to the consumer. This would apply to unsecured credit to a consumer up to a maximum of €100,000.
It is also worth noting that the review of the retail banking market which is now underway in my Department will consider how the banking system can best support economic activity, assess competition and consumer choice in the market for banking services and consider options to further develop the mortgage market.
