Michael Noonan (Limerick City, Fine Gael)

I thank Deputy Daly for his contribution. One of the difficulties in replying to the Adjournment debate is that one works from a prepared script and I had no previous sight of the Deputy's views. I will read out what I have and then comment on what he stated.

The Deputy will appreciate that a balance must be achieved by the Government between influencing the banks through the bank guarantee scheme and other financial support incentives, while at the same time staying out of the day to day running of these institutions. Banks must operate on a commercial basis. In recent years, Ireland had very low mortgage rates but now it is clear this era is coming to an end for both owner-occupiers and commercial mortgage holders.

The decisions financial institutions operating in Ireland make on the mortgage interest rates they charge to customers are commercial decisions for the institutions concerned. The Department of Finance has no direct function in an individual institution's decision on the matter. I understand the public anger when a financial institution increases its variable mortgage interest rates. Unfortunately these increases reflect market realities, including the cost of accessing funds.

As described by the Financial Regulator, Mr. Matthew Elderfield, when he appeared before the Joint Committee on Economic and Regulatory Affairs last year, part of the reason for low mortgage interest rates was that the banks' business models were fundamentally flawed. They were chasing unsustainable profits through risky property and development lending. These profits effectively subsidised aggressive campaigns for mortgage market share and unsustainably low interest rates. This business model is now being fundamentally recalibrated. Banks' costs of funding are significantly higher. Interest rate increases for borrowers are an unfortunate but inevitable consequence of these factors.

The State has a duty in this area to prioritise its efforts and resources to assist owner-occupier mortgage holders. Unfortunately the financial crisis has created conditions in which many home owners, through no fault of their own, now find themselves in arrears with their mortgage repayments and at risk of losing their homes. Through its agencies, the State is assisting mortgage holders in arrears in a m easured and proportionate manner. I set out below some details of this assistance.

The mortgage interest supplement scheme, managed by the Department of Social Protection, provides assistance where the mortgage relates to a person's principal private residence. It supports approximately 18,500 mortgage holders. The Money Advice and Budgeting Service, MABS, provides a national, free, confidential and independent service operating from 53 offices nationwide. I understand that MABS devotes a substantial amount of its resources to dealing with client mortgage difficulties.

The report of the expert group on mortgage arrears and personal debt also made a series of recommendations designed to help as many people as possible save the family home. Many of these recommendations were implemented through the revised Central Bank code of conduct on mortgage arrears while the deferred interest scheme, or a variation of it, proposed by the expert group will be adopted in 2011 by lenders representing the majority of the market.

One of the main recommendations of the expert group was that a deferred interest scheme should be put in place. This was intended to allow borrowers, subject to certain criteria being satisfied, to pay at least 66% of their mortgage interest, but less than 100%. Payment of the balance may be deferred for up to five years. Mortgage lenders have been requested to commit to the scheme. Lenders representing the majority of the market have already indicated their willingness to implement the expert group's proposals for a deferred interest scheme or a variation of it, including AIB, AIB Mortgage Bank, Bank of Ireland, ICS Building Society, EBS, Haven Mortgages, Permanent TSB and Irish Nationwide Building Society.

Much of the material I am reading was already put on the record in response to the Private Members' debate. I listened carefully to Deputy Daly and I do not think my reply meets the case he made. If he provides me with a copy of his script I will raise it with the appropriate authorities to see whether something can be done. He spoke about commercial mortgages which are moving to an interest-only repayment scheme where the lending institution is doubling the interest rate and the extra tranche is being justified because capital repayments are not being made. This is a particular area that needs examination.

As I stated at the beginning, it is difficult to reply to an Adjournment debate in realistic terms because one does not know the case that will be made when the script is being drafted. I was very interested in what the Deputy stated and if he provides me with a copy of his script I will ensure the regulatory authorities get sight of it and see whether something can be done.

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