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

As the Deputy knows, I have been aware of this issue for some time and have taken steps to ensure the banks provide real options for borrowers. To summarise actions taken to date, I requested a report from the Central Bank on the topic, which was published in May. I also met with the six main mortgage lenders and outlined my view that the interest rates being charged to Irish customers were too high.

I have recently concluded a further series of meetings with these banks and the reality is that the majority have put options in place to allow borrowers to reduce their monthly repayments. Traditionally borrowers focused on standard variable rates but borrowers should at least consider other options. While individual borrowers must decide what suits their particular circumstances, some of the fixed rates being offered are now substantially below what the standard variable rate, SVR, was in May. These rates offer substantial savings to borrowers and also offer security as to monthly repayments over a specific period of time. At the end of that term, borrowers can then revert to a standard variable rate if that is what they prefer. I would, therefore, encourage borrowers to contact their bank to see what is available to them in their particular circumstances or consider moving to another bank if the offer is not satisfactory.

I would also point out that lenders have not just reduced fixed rates. One lender significantly reduced its SVR, for example, while another has embarked on a new pricing strategy based on property valuation. I asked the banks to provide options by which customers might reduce their monthly repayments and I believe options have been put in place.

While I have not met all mortgage providers operating in Ireland, changes to interest rates by the main lenders should drive competition in the market and exert downward pressure on other lenders to reduce their rates in line with other providers. Sub-prime lenders operate in a particular niche and deal with customers who present a different risk profile to other customers, hence their rates will be higher other lenders.

Competition is the best long-term way of reducing interest rates paid by Irish borrowers and ensuring that Irish banks offer a sustainable product range. Higher than warranted mortgage interest rates will encourage new entrants to the Irish market over the long term. As the Deputy will be aware, the Government has undertaken a number of initiatives in order to promote competition in the market. For example, it introduced the changes to section 149 of the Consumer Credit Act 1995 in the Central Bank (Supervision and Enforcement) Act 2013 for new entrants. This section regulates fees and charges and the changes mean that it does not apply for the first three years of operation of new entrants to the Irish banking sector as new entrants to the mortgage market bring welcome competition to this sector.

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