Brian Lenihan Jnr (Dublin West, Fianna Fail)

The Deputy's question refers to the commitment I gave in this House on 26 March 2009 to request the consumer director in the Financial Regulator - which has a statutory mandate to safeguard customers' interests - to examine the level of redemption fees charged by banks to customers wishing to exit from fixed rate mortgages. My Department received a copy of the Financial Regulator's report on this matter on 29 June 2009. The report sets out that the Financial Regulator requested specific information from 26 lenders on how early redemption fees quoted to customers are calculated. Of the 26 lenders, 25 confirmed to the Financial Regulator that they did not impose any fees in respect of the early redemption of a fixed rate home loan other than those which would arise in the context of a normal redemption of any mortgage. In one case, a €95 fee approved under the Consumer Credit Act 1995 is charged by the lender for breaking a fixed rate mortgage. The regulator's report states that independent actuarial confirmation was also sought from all the lenders to substantiate the case that the formulae applied by them to calculate redemption fees were restricted to the recovery cost of the funding of particular fixed rate mortgage arrangements in place.

On the basis of the information supplied by the lenders, including worked examples and the actuarial confirmations submitted, the regulator concluded and has confirmed to my Department that its analysis indicates the early redemption fee calculation in all cases appears to seek to recover costs and lenders do not generally apply additional fees in the case of early redemption. The Financial Regulator has advised my Department in its report that since its findings are based on a review of material provided by lending institutions rather than verification by means of on-site inspections, it intends to carry out at least six on-site inspections on this issue.

Lenders do not, therefore, seem to be applying financial penalties to dissuade borrowers from early redemption of fixed rate mortgages. However, if the additional work to be undertaken by the regulator brings to light any information that does not support the findings and the conclusions contained in its report, the regulator has confirmed that this information will be made available immediately in the public domain.

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