Dáil Éireann Debate, Thursday - 22 June 2023
85. Deputy Mairéad Farrell asked the Minister for Finance if he has had any engagements with the retail banks to promote switching for mortgage loans held by vulture funds into the mainstream mortgage market. [30158/23]
View answerI raise again the plight faced by workers and families whose mortgages were sold on to vulture funds without their consent. These sales were supported and facilitated by both Fine Gael and Fianna Fáil. As a result of interest rate hikes, these borrowers are now facing rates of as high as 8%. They are forking out thousands more in interest every year because the vulture funds now hold their loans. What will the Government do to ensure the wrong that Fine Gael and Fianna Fáil facilitated and presided over is righted and redressed and these mortgage prisoners are protected?
Research has indicated that there is potential for existing mortgage holders to make mortgage savings by switching their mortgage. This is a particularly important consideration at a time of rising interest rates. In this regard, I have met the CEOs of the retail banks and a number of non-bank lenders and emphasised that they should take a consumer focused approach to encourage switching where possible. On behalf of my Department, the Economic and Social Research Institute, ESRI, is carrying out work which will inform the development of tools to promote switching. However, the work of the ESRI also serves to highlight consumer inertia as a critical issue in some cases, which deserves further attention. The Competition and Consumer Protection Commission, CCPC, and Money Advice & Budgeting Service, MABS, also play an important role in informing consumers about the options available to them.
It is a priority for me to ensure that the regulatory framework supports borrowers in the mortgage switching process. In the context of the review of the consumer protection code, I have indicated that the Central Bank should review the existing regulatory provisions and consider whether more dedicated mortgage switching resources, such as a stand-alone mortgage switching code, could better encourage and facilitate switching in the mortgage market. In that context, and in the context of the rise in the cost of living more generally, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers. With respect to mortgages, the Central Bank is especially focused on ensuring firms have the resources and arrangements in place to assess applications from existing and new, or switching borrowers, in a manner that is timely and based on prudent lending standards applied consistently across all applicants.
The Central Bank is also scrutinising the switching and lending activity of the retail banks to ensure there is no discrimination based on who a borrower's current creditor is and it has confirmed that the work identified no evidence to date of such discrimination. I also note that the Banking and Payments Federation of Ireland, BPFI, and MABS recently announced the expansion of their 2017 BPFI-MABS framework agreement for late-stage mortgage arrears. Going forward, the agreement will include all customers, from pre-arrears to late-stage arrears.
I mentioned earlier that we had a number of people before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. James Byrne and Grainne Quinn were present and both had their mortgage loans sold by Permanent TSB to a vulture fund. James is now being charged an interest rate of 7.25%. He is waiting for another letter in the post to inform him of the most recent hike and is paying €8,000 more in interest than he was last year. He told the committee that there is no discretionary spending in his household. There are no family holidays and every penny is counted. Grainne is now being charged an interest rate of 7.5%. Her household costs have increased by €800 per month, which is nearly €10,000 per year. She has three young children. James and Grainne's cases are not unique. It is the situation of tens of thousands of households whose mortgages were sold to vulture funds without their consent. That is the reality they face and the Minister's party, as well as Fine Gael, supported this. The Taoiseach claimed that households would be no worse off when their mortgages were sold to vulture funds. How wrong he is. What an untruth he told. I ask the Minister again whether he believes there is a moral responsibility on the originating banks, the likes of Permanent TSB, AIB, and Bank of Ireland, to create a pathway for those loans to come away from the vulture funds and back into mainstream lending.
I ask Deputy Doherty to stick to the time allotted, please.
We need to see more switching activity, including from the non-bank sector to the banking sector. I have been very clear with the retail banks that I expect them to be receptive and welcoming of applications from customers who are currently in the non-bank sector. There will be mortgages that it will simply not be possible to switch. We are all aware of the requirement on banks to maintain a certain level of non-performing exposures, as in they must not rise beyond a certain point. The European Banking Authority, EBA, and the Central Bank of Ireland engage with the retail banks on that issue on a regular basis. That said, there are many mortgage holders with the non-banks who are fully repaying their mortgage, including the two the Deputy identified who appeared before the committee, and there are others for whom, with forbearance, a solution can be put in place and there is a pathway to them becoming fully performing. We need more switching activity and we need the banks to be more open and more welcoming of customers in the non-bank sector who want to switch their mortgages. I am engaging with the sector and with the Central Bank with a view to bringing that about.
To give the Minister an example, James is meeting all his mortgage payments, has never defaulted and has never gone into arrears. Permanent TSB, his originator bank, is State-owned and the Minister is a majority shareholder in it. That bank will not even entertain James in relation to switching. It will not deal with him at all because he has a split mortgage. Permanent TSB actually established that split mortgage and did so in a way that it was deemed a non-performing loan, even though James met every single payment. These people are mortgage prisoners. They have never missed a payment in their lives yet they cannot switch to any bank. Bank of Ireland is the only bank that would actually engage with them and it was not able to cover the full extent of the mortgage. That is only James but there are tens of thousands of these cases. There are people who will be able to switch and they should do so and get professional advice. There are others who cannot because they are in arrears and have serious problems. There are others like James and all the rest who the banks will not entertain because they do not want the hassle of those types of mortgages. I ask the Minister for Finance to say very clearly, as I would, that there is a moral responsibility on those banks that originated these loans to now facilitate loans that can be met moving back into their banks. We have to create a pathway to do that. It is not normal lending; it has to be something unique given the uniqueness of this situation.
I have already publicly said, and I am happy to repeat that statement, that the banks have an important role to play in facilitating and welcoming switchers from all parts of the financial sector, including from the non-bank sector. There are many inherently good mortgages which may technically be deemed to be a non-performing exposure but which can be cured in that technical sense because the customers are co-operating and paying their mortgages in line with the agreement they have. There may be some mortgages where it is not possible to switch them back because they are deep in arrears or the customers are not co-operating or have not made a payment in six or 12 months. However, in the vast majority of cases, people are making a genuine effort and there is an obligation on the banking sector to engage in a spirit of co-operation and to positively welcome and be receptive to customers in the non-bank sector who are making a genuine effort to pay their mortgages. These customers should be welcomed in terms of a switching application process that leads to successful switching to a much greater degree than we are currently seeing.
