Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I have listened carefully to all that has been said on the motion last night and tonight. I appreciate the fact that this standard variable rate charge by the various financial institutions in Ireland has a huge impact on individual households and has a constraining effect on their consumption of other goods and services. This interest rate issue was discussed here earlier during Questions and I gave a commitment to speak again with the Governor of the Central Bank and request that he considers how best to influence the banks to reduce SVRs charged to borrowers. A meeting has been scheduled for tomorrow.

I also hope that the debates have shed light on the complex factors at play in the setting of interest rates by independent financial institutions. It should be clear that it would be simplistic to say that a ceiling should be set for mortgage rates and expect that there would be no consequences other than reduced rates. This seems to be accepted on all sides of the House. It is universally accepted that additional competition will have the effect of reducing prices to consumers, which in the mortgage sector means reducing the SVR. Lower rates are available for many standard variable mortgage customers if they switch lender. The banks must be convinced that they are at risk of losing customers if they persist with SVRs that are higher than the rate their customers could get elsewhere. People who are in a position to move mortgages should look into their options to do so. The CCPC website at consumerhelp.ie has useful information on the process. The website also contains comparisons of mortgage products and gives information on incentives that institutions will give to encourage switching. People can be put off by the up front and legal costs involved in switching but some institutions pay some or all of the fees involved and in some case the interest savings can be significant. I fully accept this is not an option for everyone but I would encourage people to take the time to explore it.

The Government is playing its part by putting the structures in place to increase competition and ensuring there are no obstacles to new entrants to the market. The Government continues to work to create an environment conducive to the entry of new entrants primarily through the implementation of policies to promote economic recovery and employment creation but also through various initiatives to ensure that there is an adequate pool of credit to underpin the recovery. The Government's actions in this area include the establishment of the Strategic Banking Corporation of Ireland, the credit guarantee scheme and the amendment to section 149 of the Consumer Credit Act to encourage new entrants into the financial sector.

The Government will welcome any innovative products put forward by the banks as a way to address the situation in which we find ourselves but only insofar as they are sustainable. However, if the banks begin to offer mortgage rates at unsustainable, low levels as they did in the past, we could again be dragged back into a situation where their business model does not work, with all the trauma that brings for the economy and society.

In budget 2012, mortgage interest relief was increased to 30% for all first time buyers who bought between 1 January 2004 and 31 December 2008. This is a significant saving and highlights this Government's commitment to support mortgage holders to pay their mortgage. It will continue to be available at this rate until the end of 2017 for those buyers. The Government is committed to applying downward pressure on mortgage rates by increasing and supporting competition in the market. This commitment was made in the statement of Government priorities 2014 to 2016.

I will meet the Governor of the Central Bank tomorrow and I will request that he considers how best to influence the banks to reduce SVRs charged to all borrowers. As I indicated, this is a topic on which the House agrees and I will convey this to the Governor.

Comparisons have been made, which were incorrect. For example, AIB offers a mortgage rate of 4.15% whereas its subsidiary in Northern Ireland offers a rate of 4.75%, 60 basis points higher, while Bank of Ireland offers a mortgage rate of 4.49% in Northern Ireland and 4.5% in the Republic, a difference of 0.01%. Many of the statistics produced by Opposition Members are just not correct.

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