Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I move amendment No. 1:

To delete all words after "Dáil Éireann" and substitute the following:

"notes that:

— the European Central Bank (ECB) is independent in the formulation of monetary policy for the Eurozone Area;

— the ECB's objective is to maintain price stability and wishes to ensure a timely return of inflation to its 2 per cent medium-term target; and

— since last June, the ECB has increased official interest rates on six occasions by a total of 3.5 percentage points;

recognises that:

— the changed interest rate environment will not have a uniform impact on all borrowers and, depending on particular situations such as the terms of individual contracts, some borrowers will experience a higher increase in interest rates than other borrowers; and

— in addition to the general increase in the cost of living, an increase in interest rates will pose difficulties for many borrowers;

further notes that:

— the reintroduction of mortgage interest relief, even on a selective or tailored basis, is likely to involve significant costs and needs to be considered, not on an ad hoc basis, but in the context of a range of other cost of living measures being provided; and

— recent research by the Economic and Social Research Institute Behavioural Research Unit found that consumers can potentially make substantial savings by choosing better value financial products, including mortgages;

recalls that:

— Budget 2023 was a 'cost of living' budget, focused on addressing inflationary pressures;

— a budget package of €6.9 billion is in place for this year, including over €3 billion in direct measures to address the cost-of-living challenge, such as adjustments to income tax bands and increases in social welfare payments;

— this was complemented by a set of one-off cost of living supports introduced in the final quarter of last year worth over €4 billion, and this built on the cost of living measures announced before Budget 2023 amounting to €3 billion;

— the Government has continued to act to respond to the rising cost of living, and a further package of supports worth €1.3 billion was introduced in February; and

— this brings the total fiscal support made available by Government to assist with the cost of living challenge to some €12 billion, or almost 4.5 per cent of modified national income;

further recognises that:

— while a general government surplus of €10 billion is projected for 2023, this figure includes windfall corporation tax receipts estimated at almost €12 billion this year; and

— if these potentially transient receipts are excluded, there is a significant underlying deficit in the public finances;

acknowledges that:

— Government policy must strike a balance between providing support when appropriate and ensuring the public finances remain on a sustainable trajectory over the medium-term;

— the increase in inflation over the last year has had a significant impact on the cost of living for Irish citizens;

— while the Government has already acted repeatedly and on a significant scale to absorb some of the impact, fiscal policy must remain broadly neutral so as not to add to inflationary pressures;

— borrowing costs, including sovereign borrowing costs, are on a rising trajectory, increasing the importance of prudent fiscal policy; and

— the budgetary process is the best and most appropriate way to consider further action on the cost-of-living challenge, and this issue must be addressed in a strategic, comprehensive and responsible manner;

furthermore, notes that:

— there is a strong consumer protection framework in place for borrowers who may experience repayment difficulty due to rising interest rates or the cost of living more generally;

— all Central Bank of Ireland regulated lenders and credit servicers, both banks and 'non-banks', are required to follow the provisions of the relevant statutory consumer protection codes, including the Consumer Protection Code and the Code of Conduct on Mortgage Arrears;

— in particular, all cases of mortgage repayment difficulty have to be handled positively and sympathetically by a lender or servicer with the objective at all times of assisting the borrower to meet his or her mortgage obligations, and cost of living regulated entities must work with co-operating borrowers to, if possible, put in place a suitable alternative repayment arrangement;

— the Governor of the Central Bank of Ireland has indicated that the Central Bank expects firms to be prepared and to be proactive in supporting their customers to navigate the changing economic environment; and

— there are a number of public initiatives to assist people who are in mortgage or other debt difficulty, such as the Abhaile service, which is made up of the Insolvency Service of Ireland, the Legal Aid Board, the Money Advice and Budgeting Service and the Citizens Information Board, which provides free financial advice and, where appropriate also, legal advice to people experiencing difficulty with their mortgage; and

therefore:

— supports the Central Bank of Ireland as it continues to supervise and engage with regulated firms, to ensure that such firms use all their range of forbearance for borrowers facing repayment difficulty;

— in particular, encourages the Central Bank of Ireland to continue its engagement with 'non-bank' regulated firms to ensure that the suite of products provided to their customers who are experiencing difficulty is in line with the bank's expectations;

— also calls on the Central Bank of Ireland to ensure that all lenders assess all switching applications in a prudent and fair manner regardless of the borrower's current mortgage provider; and

— notes that much progress has been made in recent years in reducing the level of mortgage arrears, including during the Covid-19 period, and calls on mortgage creditors and relevant public bodies to continue their efforts to further tackle existing mortgage arrears cases."

I thank the Deputies for raising this important issue in the House this evening. Let me begin by acknowledging the common ground that exists here tonight. The current inflationary environment and the resulting increase in interest rates undoubtedly present serious ongoing challenges for many. High levels of inflation cause difficulties for the economy and hurts households and businesses. Inflation impacts people's real incomes, increases costs for firms and heightens economic uncertainty. I and my Government colleagues recognise and acknowledge this. While inflation in Ireland has fallen, it is still running too high. The European Central Bank has an independent mandate to maintain price stability and is taking action to bring it down to its desired target of 2% over the medium term. The ECB has now increased its official interest rates six times since last summer, as Deputy Doherty said.

Due to their particular contractual arrangements, existing tracker mortgage borrowers will see that their interest rate is increasing in line with ECB rates. For borrowers on fixed-rate mortgage contracts, their interest rate will not change over the period the interest rate is fixed. By its nature, the adjustment of the interest rate on a variable mortgage is more flexible. The data indicate that a significant proportion, 93% in February this year, of new mortgages in recent times are fixed-rate mortgages and this will protect borrowers in the event of a rise in official and market interest rates for at least the period that the interest rate is fixed.

The Irish average interest rate on new mortgages is now below the eurozone average and in February Ireland had the third lowest mortgage rates in the eurozone for new mortgages. However, I acknowledge, of course, that interest rates are higher on outstanding mortgages. Central Bank data indicate that, at the end of last year, the average interest rate on mortgages held by banks was 2.93% and it was 3.26% for those held by non-banks.

The increase in the level of interest rates, allied to the general increase in the cost of living, causes real difficulties for some mortgage holders. I and my Government colleagues are acutely aware of this. In this regard, I am continuing to liaise closely with the Central Bank and I have also engaged directly with mortgage lenders. In the context of the Central Bank's review of the consumer protection code, I have indicated that it will be important to support borrowers as they seek to minimise their mortgage costs and to assist the mortgage switching process. Lenders can do more to show that they are open to mortgage switching applications and to resource that banking activity. It is my view that the Central Bank should further review existing regulatory provisions and consider whether a stand-alone mortgage switching code could better encourage and facilitate switching in the mortgage market in Ireland. The Central Bank should put further information and data on the mortgage market into the public domain and I understand that the bank intends to publish material and research on the impact of rising interest rates on mortgage borrowers tomorrow. I look forward to that.

The drivers of inflation are global in nature and, accordingly, it is not possible for any Government to fully absorb the costs. However, this Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation. The policy response has also been designed to avoid generating second round effects that could lead to an inflationary spiral. Overall, €12 billion in direct relief has been made available to counter the effects of inflation so far.

It is important that the cost-of-living issue is addressed in a strategic, comprehensive and responsible manner and the budgetary process is the best and, in my view, the most appropriate way to consider further action in respect of the cost-of-living challenge. The reintroduction of mortgage interest relief, even on a selective or tailored basis, is likely to involve significant costs and needs to be considered not on an ad hocbasis, but in the context of a range of other cost-of-living measures being provided. As the Deputy will be aware, mortgage interest relief for principal private residences was phased out on a gradual basis from 2009 onwards. As part of the discussions leading to the Programme for a Partnership Government in 2016, I proposed and it was agreed to retain mortgage interest relief beyond the original end date of 2017 on a tapered basis up to 2020. This tapered extension took the form of the continuation of 75% of the existing relief into 2018, 50% in 2019 and 25% in 2020. The decision to taper the ending of the relief was targeted at people who had taken out their mortgages at the height of the property price boom and were in substantial negative equity. Notably, this motion put forward does not include an estimated costing of the proposal, nor does it specify the duration of the relief, although it was said tonight that it would be until the end of the year.

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