Dáil Éireann Debate, Tuesday - 4 April 2017
210. Deputy Michael Healy-Rae asked the Minister for Finance the reason Irish citizens have to pay almost double the average European interest rates; and if he will make a statement on the matter. [16614/17]
Amharc ar fhreagra220. Deputy Bernard J. Durkan asked the Minister for Finance if the banks here are justified in charging higher mortgage interest rates than throughout the rest of Europe in view of the fact that taxpayers here are instrumental in bailing out the lending institutions; and if he will make a statement on the matter. [16739/17]
Amharc ar fhreagraI propose to take Questions Nos. 210 and 220 together.
There are a number of factors, such as differences in national legal and housing systems, cultural preferences, the proximity of lenders to borrowers, which will impact on the levels of interest rates in different countries. More directly, credit and market conditions, mortgage default rates and the funding of mortgage credit will also be relevant factors.
In particular legacy issues, such as a high level of non-performing loans on the balance sheets of Irish banks, together with other input costs were outlined in a report published by the Central Bank of Ireland in May 2015 as factors which impact upon the pricing of variable rate mortgages in Ireland. These legacy issues include higher costs from credit losses, higher funding costs, higher levels of capital resulting from regulatory changes, higher required capital per euro of risk given the severe loss experience in the crisis, higher operating cost per euro of loans given falling balance sheets and the fixed cost base that comes with the infrastructure requirements of large retail banks.
It is very important to ensure that new mortgages are sold to borrowers in a transparent manner. The Central Bank, therefore, requires that all mortgages are advertised and sold in accordance with the requirements of financial services legislation (including Central Bank Codes), and that consumers who choose a given mortgage product (or to switch to a new product) are treated in accordance with these requirements in the context of the product they have chosen. Additionally, the Central Bank has carried out research which showed that there is scope for borrowers to save money by switching mortgages. The Competition and Consumer Protection Commission has launched a mortgage switching tool for consumers (which itself notes the findings of the Central Bank research of cases where borrowers could make savings) and also recent changes have been made to the Consumer Protection Code which, inter alia, places an onus on a lender to provide information on other mortgage products offered by that lender which could provide savings to the borrower.
The issue of mortgage interest rates is a significant one for this Government. In overall terms, the Government is of the opinion that increased competition is the best way to ensure that retail lending rates are driven down in a sustainable way for the market as a whole and thereby promote overall consumer welfare.
To that end, the Competition and Consumer Protection Commission (CCPC) is reviewing the mortgage market with a view to setting out options for Government in terms of market structure, legislation and regulation to lower the cost of secured mortgage lending and to improve the degree of competition and consumer protection. In liaison with the Central Bank, the CCPC has now commenced this work and announced a public consultation to gather views about the future of the Irish mortgage market. It is expected that the CCPC will produce the report outlining their proposals by the end of May 2017.
This is a policy area that the Government will keep under active review in its ongoing engagement with mortgage lenders and in implementing the Programme for Government commitments to help deliver on a long term basis better outcomes for all mortgage borrowers.
