Fergus O'Dowd (Louth, Fine Gael)

The issue of mortgage arrears is of the utmost importance to the Government. The establishment of a Government committee to co-ordinate and oversee the implementation of a whole of Government response to the problem is evidence of this.

However, there is no single or quick solution to deal with the mortgage problem. Each case is different and the circumstances of each household will be unique. A range of solutions across a number of Departments, and also from the banks, will be required. Progress has already been achieved. For example, personal insolvency reform was identified in the Keane report as central to the resolution of the mortgage arrears problem.

Deputies will be aware that the heads of a personal insolvency Bill have now been published. The views of the relevant Oireachtas committee, and other interested parties, will be taken into consideration by the Government in the formalisation of the Bill. Other aspects of this implementation agenda are mortgages to rent and Central Bank engagement with banks. The provision of a mortgage advisory function will also be advanced by relevant Departments and agencies in conjunction with the Department of Finance.

On the issue of the standard variable rate charged by PTSB, it should be noted that mortgage rates generally are rising to reflect the increased costs of funding being incurred by all banks. The higher cost of funding is being driven primarily through the increased cost of wholesale funding and high deposit rates, which are beneficial for consumers. As banks reduce their dependence on ECB funding, as they should do, the cost of funding naturally increases.

While we sympathise with the impact of the higher PTSB rates on consumers, it is important to reflect on the facts of the situation. The average standard variable rate loan in PTSB, including buy-to-let mortgages, is €82,600. The average tracker mortgage is far higher and these borrowers are currently paying historically low rates. The banks have to strike an appropriate balance between operating a viable, commercial bank which can make a return for the taxpayer on its substantial investment and meeting the needs of consumers. In arriving at their decisions, the banks have to take into account their ability to operate a business which can ultimately sustain itself without the need for taxpayer support. The taxpayer has already had to pay far too much to support banks. This is not sustainable as the taxpayer has to fund public services to those most in need in our society, namely the elderly, the unemployed and the disadvantaged.

Neither the Central Bank nor the Department of Finance has a statutory function in regard to interest rate decisions made by banks. The Deputy Governor of the Central Bank has stated to the Government that, within its existing powers and through the use of suasion, the Central Bank will engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds. Within this framework, we will continue to work with PTSB on the development of its future plans.

We need to be absolutely sure that we do not do anything which restricts or hinders the flow of credit. The Mazars survey found a reduction in the demand for credit. The level of application to the Credit Review Office, CRO, remains low. If people with viable propositions are being refused credit, they need to go to the CRO and nothing should discourage them from doing so. It overturns 50% of bank refusals and provides a user friendly service to borrowers. It can also assist when there is a constructive refusal of credit which was referred to yesterday. I appreciate that business people are fatigued but they must follow through on refusals to force the banks to respond. In that context, when Deputies are approached by dissatisfied businesses that have been refused credit, such businesses should go directly to the CRO. This is much more likely to improve the situation. When considering such cases, it must remain the case that viability continues to be the key determinant in the decision to grant credit and this is a factor which has constantly been highlighted by the credit reviewer in his report on bank lending.

The Government continues to see the SME sector as a vital hub in the recovery and regeneration of the economy. That is why the important and vital new initiatives such as the loan guarantee scheme and the microfinance fund are being introduced. The Government has done more in the past 12 months to return the banks to a more stable level than the previous Government did in its entire period of office. We intend to build on this progress and make sure the banks are focused on the needs of their customers and the wider Irish economy. That is the only way they will be able to repay all of the support that they have received.

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