Peadar Tóibín
Question:57. Deputy Peadar Tóibín asked the Minister for Finance if his attention has been drawn to mortgage interest rate increases (details supplied); and if he will make a statement on the matter. [21447/23]
View answerTuesday, 9 May 2023
Questions (57)
Written answers
The formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB). As the Deputy is aware, the ECB has increased official interest rates over recent months as it attempts to combat inflation. The level of official interest rates will influence the overall level of interest rates throughout the economy. However, the setting of retail lending rates by individual lenders is a commercial matter for that lender and I have no function or role in such decision making matters by financial institutions. In line with the changing interest rate environment and other relevant factors, individual lenders are considering and adjusting their new lending rates. Nevertheless, it is worth noting that, on an overall level, the increase in weighted average interest rate on new Irish mortgage agreements has not been as large as it has been in some other countries. At end-February 2023 the average rate on new mortgages was 2.92% and it is now among the lowest in the euro area.
Also it should be noted that the structure of the Irish mortgage market is changing and that there is an increase in the take up of fixed rate mortgages - in February 2023 for example 93% of new mortgages were at a fixed interest rate - and this protects borrowers from interest rate changes for the period that the interest rate is fixed. Also, as regulator, the Central Bank has introduced a number of increased protections for variable rate mortgage holders in recent years which help mortgage holders identify lower cost mortgage options. Firstly it made changes to the Consumer Protection Code which required lenders to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates. Secondly, it also increases the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool. However, it is the case that some borrowers will experience repayment difficulty on a mortgage secured on a primary residence and the Code of Conduct on Mortgage Arrears (CCMA) was introduced to ensure that regulated entities have fair and transparent processes in place for dealing with such cases.
The CCMA sets out the process that entities must follow when a borrower is in or facing difficulties with their mortgage payments and it states that all arrears cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations. There is an obligation on regulated entities to explore all of the options for alternative repayment arrangements (ARAs) offered by that entity, in order to determine which ARA, if any, is appropriate and sustainable for the borrower’s individual circumstances.
I would encourage borrowers to engage with their lender to discuss any difficulty that may be arising in relation to a mortgage. Early and on-going engagement has been shown to yield positive results for both borrowers and lenders in addressing a repayment difficulty.
Questions Nos. 58 to 61, inclusive, answered orally.