Darragh O'Brien (Dublin Fingal, Fianna Fail) | Oireachtas source

This was debated with the Sinn Féin motion last night and it was also raised on Leaders' Questions yesterday. The Deputy knows that the formulation of monetary policy is an independent matter for the European Central Bank. We are acutely aware that the ECB has hiked its key interest rates by 3% since last July to fight inflation. That is why it is being done. We expect two further rate increases. It is up to each individual lender to decide on whether to pass on those increases. The Government has no role in setting retail interest rates, as the Deputy also knows. That is solely a commercial matter for the individual lenders. It is also important to note that the average interest rate on new mortgages in Ireland was 2.69% in December and the average rate for mortgages in the eurozone was just short of 3%. We have one of the lowest new variable rates in Europe. That has been a significant change over recent years.

At the finance committee last month, representatives from the Central Bank reiterated that regulated lenders including banks and non-banks have very clear obligations under the code of conduct on mortgage arrears and the Central Banks supervisory regime to have supports, resources and options available for any borrower who feels they may be challenged in meeting their mortgage repayments. In November 2022 the Central Bank wrote to lenders to emphasise the onus on them to review their product lines and suites of options to make sure they remain fit for purpose. In the case of credit, that means making sure the loans remain affordable. Thankfully, we have seen a continued reduction in long-standing mortgage arrears where rates have fallen quite substantially in the last number of years. The banks' supervisory regime focuses on affordability and kicks in not just when a person falls into arrears but when a person is facing arrears. It is more extensive, detailed and intrusive than in any other European jurisdiction. The Central Bank said last week that the area on which it is most focused is the one which Deputy Doherty has raised, namely the 38,000 borrowers who are on high interest rates with the non-bank lenders who do not have a full suite of options available to them. Many cannot switch into fixed rates. Many can and are not aware that they can if their loan is a performing loan now. The Minister for Finance, Deputy Michael McGrath, met the Governor of the Central Bank this week and asked the regulator if it needs more legal powers to assist such mortgage holders. That is being worked on right now. Borrowers facing financial difficulty should engage with lenders as early as possible as a way of addressing the issues. Borrowers can appeal any decision to the Financial Services Ombudsman.

On specific tax measures, the Deputy knows that tax decisions are made in a co-ordinated way through the annual budget process which generally follows the establishment of a pathway taking into account the national economic dialogue, the summer economic statement and the tax strategy group deliberations. Mortgage interest relief cost the Exchequer more than €700 million a year if you go back to 2008, which was the final year before the gradual phasing out of mortgage-interest relief. Sinn Féin's proposals to reintroduce mortgage-interest relief would be of no benefit to fixed-rate mortgages yet the average outstanding balance as of June 2022 on tracker mortgages is about €107,000 whereas the corresponding figure for fixed-rate mortgages is just short of €175,000. Moreover the average new mortgage draw-down in the third quarter of 2022 was €284,000. Thankfully, the vast majority of new mortgages in Ireland now, over 90%, are on a fixed-rate basis. There are issues with the non-bank lenders and the Minister for Finance has been working with the Governor of the Central Bank about strengthening its code and asking the Central Bank what additional powers it would require to help in the area.

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