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

I thank Deputy McGrath for the Bill. I was sorry I could not be here yesterday but I was in Brussels. The Government is concerned about the issue of the high mortgage repayments being faced by mortgage holders and I have made it clear that the issue of a penal banking levy in the budget or powers for the Central Bank to regulate interest rates will be considered if sufficient progress on this issue is not made. I have also made it clear that I will meet banks again in September once I have reviewed the initiatives they have undertaken since the last meetings. At those meetings, I urged them to review their rates and products, and by the beginning of July to have simple options to reduce monthly mortgage rates for existing and new standard variable rate customers.

The main banks have announced a range of new products offering customers lower monthly mortgage repayments, so any suggestions there has not been action is not an accurate presentation of the facts. The question is whether individual banks have done enough for their customers and whether there are new products the type their customers want. A review of what progress has been made is taking place. The main lenders have initiated new measures ranging from lower standard variable rates to new loan to value products and fixed rate products. These new offerings could result in monthly savings for mortgage customers and I urge customers to see if an option is available which will suit their circumstances and save them money on their repayments.

Customers with high standard variable rates now have options to lower their monthly mortgage repayments, which is what I urged the banks to provide. Many of the new fixed rate offerings are considerably lower than the standard variable rates and could result in immediate savings for borrowers where it suited their circumstances to change rate. I encourage Deputies to advise their constituents to examine the new offerings from their bank or other banks if they are in a position to switch because monthly savings can be made. While each customer should examine the range of new products and decide what is in his or her best interests, Deputies should also be conscious that advising their constituents not even to consider lower cost products or advising them to delay the decision to move to a lower product could mean they are advising customers to continue to pay higher monthly mortgage payments.

A number of the banks have embarked on significant advertising campaigns to attract new customers and encourage switching. This is important because if the banks believe they will lose customers, it will encourage them to offer more competitive rates to existing customers. Switching would also increase the overall competitive nature of the market, which in turn will drive down interest rates. We have not had much of a switcher market, but with increased promotion by the banks themselves and a significant public awareness campaign on this issue coming from the Competition and Consumer Protection Commission in early autumn it will be easier for customers to know how to go about this process and the savings which switching could mean for them.

Nevertheless, I remind Deputies the banks' announcements are being reviewed and a follow-up set of meetings is scheduled for September. Therefore, we are only in the middle of a process which I outlined in May, and to legislate now would not be appropriate. It is also worth noting that regulation of interest rates is complex and should not be undertaken lightly for a possible short-term gain if the long-term effects could prove more detrimental to customers. In this regard, I highlight again that on numerous occasions the Central Bank has said it is opposed to regulation of interest rates. As recently as this week, when I referred Deputy McGrath's Bill to the Central Bank for its observations, it repeated this position. As I have stated before, if the Central Bank wants the power to regulate interest rates, it will be given this power.

The Government must and will act in the interests of the people, but those interests are best served if we take account of the advice of the Central Bank and other independent bodies in this area. We should not return to a position where the advice of the Central Bank is ignored. We should take the time to consider this advice. That said, we will act if, on consideration, we believe it is the right thing to do, but let us not act rashly and have borrowers and taxpayers suffer the consequences in the long term.

Deputies should be aware of what is going on in another room in the building where the banking inquiry is under way and whatever is the result is a Central Bank that did not state its independent view made a contribution to the crisis, so I will not ignore the advice of the Central Bank and Deputies opposite should not either. The Government is therefore opposing the Bill. I will keep the situation under review and the Government will continue to build on the work it has done to foster competition in the market, which represents the best solution to this issue long term.

Let us acknowledge the progress made, allow borrowers to look into the new options available to them and let us have the time to review carefully what has happened before acting. I am meeting representatives of the banks again in September and the Deputies may be assured that I will consider all options available to me at that time. I again thank Deputy Michael McGrath, as I know he is genuinely seeking a better solution. I appreciate the work he has put into the legislation.

See this speech in context