Thursday, 16 December 2021
Ceisteanna Eile - Other Questions
Mortgage Interest Rates
While competition issues generally are primarily a matter for the Competition and Consumer Protection Commission, competitive pressures in the banking sector can clearly have an effect on the functioning of the financial system and on the quality and price of credit and other banking services provided to customers. It is accepted that the Irish retail banking system is relatively concentrated by international standards and the recent decisions by some banks to leave the Irish market will further impact on this. However, against this, it should also be noted that some new lenders have entered the market and are playing a greater role in the provision of new mortgage lending. More generally, it is likely that increased competition in the provision of financial services globally will take place and that this will have an influence in Ireland with potential new entrants to both bank and non-bank lending, deposit-taking and payments markets for households and businesses.
The European Union’s initiatives in the context of the capital markets union, which aims to improve the provision of financial services across borders within the Union, also have the potential to further improve levels of choice regarding savings and investments for consumers, and to improve access to finance for businesses in the Irish economy. Further, the scope for provision of services within the Union will be enhanced by the adoption of digital financial technologies already under way.
Even in a concentrated banking system such as that in place in our economy in recent years, price competition is possible, particularly in a growing economy. Trends show that interest rates in Ireland have been falling in recent years, providing benefit to consumers. Interest rates on new mortgages, excluding renegotiated mortgages, have fallen from 4.05% in December 2014 to 2.73% in October 2021. SME and consumer loans interest rates have also declined over the same period. I fully appreciate that enhanced sustainable competition in the market will be of benefit to consumers. Accordingly, the review of the retail banking market which is now under way in the Department of Finance will assess various aspects of the banking market and will consider options to encourage greater competition in the credit and banking market, including possible options to develop the mortgage market.