Dáil Éireann Debate, Thursday - 9 May 2013
80. Deputy Nicky McFadden asked the Minister for Finance the measures being taken to support variable rate mortgage holders in relation to engagement with banks; and if he will make a statement on the matter. [22098/13]
Amharc ar fhreagraThe Central Bank of Ireland (CBI) has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. However, the Central Bank has no statutory role in the setting of interest rates by regulated entities, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997. I am informed by the Central Bank that each institution determines the rate it charges its customers, depending on a number of factors such as cost of funds and commercial considerations, such as competition, risk pricing and the impact on deposit rates.
However within its existing powers and through the use of suasion, the Central Bank continues to engage with specific lenders which appear to have standard variable rates set disproportionately to their cost of funds. Also, the Central Bank wrote to all mortgage lenders in October 2011 and asked them to consider the impact on arrears when considering any future interest rate increases.
The CBI has informed me that given the increased financial pressures currently being experienced by mortgage consumers, the CBI was of the view that they needed sufficient time to plan for any increases in their standard variable interest rate. As such, in February 2011, the Central Bank advised mortgage lenders that it expected them to notify these consumers, in writing, at least one month in advance of any increases in their standard variable rate. This notification must include a) the date from which the new rate will apply; b) the details of the old and new rate; c) the revised repayment amount; and d) an invitation for the consumer to contact the lender if he/she anticipates difficulties meeting the higher repayments.
