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

I move amendment No. 2:

To delete all the 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 two per cent medium-term target; and

- since the middle of 2022, the ECB has increased official interest rates on ten occasions by a total of 4.5 percentage points; recognises that: - the determination of retail interest rates is a business matter for individual lenders;

- the level of official interest rates is only one of the factors which will influence the level of retail interest rates;

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

- the Government is aware of the challenges some mortgage holders are facing due to rising interest rates; further notes that: - the reintroduction of mortgage interest relief, even on a selective or targeted basis, is likely to involve a significant cost;

- the Budget is the best time to decide how to deploy available resources to support households and various groups; and

- in relation to the bank levy, the contribution by each bank within the scope of the bank levy was the same in 2022 as it had been in the previous year and that the extension of the bank levy is under active consideration and further details will be announced in the context of Budget 2024; recalls that: - this Government has made substantial fiscal support available to assist with the cost-of-living challenges amounting thus far to some €12 billion;

- €3 billion in cost-of-living measures were introduced prior to Budget 2023;

- Budget 2023 was a 'cost-of-living' Budget, focussed on addressing inflationary pressures; the Budget package amounted to €6.9 billion, which included over €3 billion in direct measures to address the cost-of-living challenges 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

- the Government has continued to act in response to the rising cost-of-living; and in February this year, a further package of supports worth €1.3 billion was introduced; acknowledges 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 regulated mortgage entities, 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 their mortgage obligations and that regulated entities must work with co-operating borrowers to, if possible, put in place a suitable alternative repayment arrangement; 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 (ISI), the Legal Aid Board, the Money Advice and Budgeting Service (MABS) and the Citizens Information Board (CIB) which provides free financial advice and, where appropriate, also legal advice to people experiencing difficulty with their mortgage; furthermore notes that: - the Government and the Central Bank of Ireland, as independent regulator for financial services providers, have engaged with banks and other regulated mortgage entities to ensure that supports are available to mortgage borrowers;

- on 31st August the Minister for Finance, with attendance from the Central Bank of Ireland, the ISI, the CIB and MABS, met the Banking and Payments Federation Ireland (BPFI) and the Chief Executive Officers and senior representatives of the retail banks, retail credit firms and credit servicing firms to indicate that they need to support their customers at this time;

- following this meeting, on 6th September the BPFI outlined a package of further measures to support borrowers who can and wish to switch mortgage or who are experiencing repayment difficulty; and

- this supports the ongoing work of the Central Bank of Ireland to scrutinise regulated firms; and therefore: - supports the Central Bank of Ireland in its regulatory work to ensure that borrowers who should be able and who wish to switch are supported to do so and that those facing repayment difficulty are supported with alternative repayment arrangements where appropriate;

- calls on all mortgage lenders to assess and consider switching applications in a prudent and fair manner, regardless of the borrower's current mortgage provider; and

- calls on all regulated mortgage entities to assist their customers experiencing repayment difficulty and to use all alterative repayment arrangement options at their disposal.".

I thank Deputy Doherty and his colleagues for raising this issue on the floor of the House and affording an opportunity to me and to us all to debate what is undoubtedly a very important issue for many people. As colleagues will know well, the European Central Bank has an independent mandate to maintain price stability. Unfortunately for all of us, inflation is still running too high and the ECB has taken further action to bring it down to its desired target of 2% over the medium term. As colleagues have mentioned a number of times, the ECB has now increased its official interest rates on ten occasions since summer 2022 and its main lending rate is now 4.5%. The scale and pace of recent monetary policy tightening is unprecedented in the history of the euro.

The level of official interest rates does not have a uniform impact on the interest rates charged on retail mortgage and other credit products. People on trackers and variable rate mortgages have seen their rates go up, matching the ECB increases, while a substantial number of people on fixed rates have been sheltered from ECB rate rises, at least so far and until their time on that product expires. The Central Bank has indicated that up to half of all mortgage holders at retail banks are likely to have experienced no increase in repayments by the end of this year and around 40% will be insulated from higher rates by the end of next year. Nevertheless, I and the Government are fully aware that the increase in the level of interest rates, which is unprecedented, allied to the general increase in the cost of living which people are grappling with is causing genuine difficulties for many mortgage holders. It is essential, therefore, that lenders and servicers step forward and assist their customers who are experiencing difficulty as a result.

Since the change in the interest rate cycle, the Central Bank, as independent regulator, has taken action to ensure firms proactively deal with emerging difficulties for their customers. In my own role as Minister for Finance, I asked my Department to establish a long-term mortgage arrears group comprising officials from the Department of Housing, Local Government and Heritage, the Department of Justice, the Department of Social Protection and the Department of Finance. I have also asked the Insolvency Service of Ireland, MABS and the Central Bank to be a part of this group. The objective of the group is to examine the full suite of measures in place to reduce the number of people in long-term mortgage arrears and to recommend changes.

On 31 August, I convened a round-table meeting of the mortgage industry. This was attended by Banking and Payments Federation Ireland, BPFI, and the CEOs and senior representatives of all the main mortgage lenders and servicers, including AIB, Bank of Ireland, Permanent TSB, Pepper, Mars Capital, Avant Money, Dilosk and other mortgage entities. The Central Bank, the Insolvency Service of Ireland, the Citizens Information Board and MABS were also in attendance and they confirmed what we already knew, namely, from the inquiries coming to them, an increasing number of borrowers are encountering difficulty in meeting their mortgage repayments. They also noted cases where borrowers are prioritising their mortgage payments but that financial difficulties are arising in other areas of their lives as a result. On behalf of the Government, I made it clear that banks and all other mortgage entities should be fully aware of the major challenges that some of their customers are facing.

Many mortgage holders have been in direct contact with me, as they have been with members of the Opposition, and with my Department and my colleagues in government, sharing their own personal stories. I know that many are deeply worried about their ability to pay their mortgage now and in the future. I informed the banks and the non-banks of my view that if people are making a genuine effort to pay their mortgage, they should not be allowed to fall into arrears due to the changed interest rate environment. The industry indicated it is closely monitoring the mortgage situation and will actively work with customers to address any repayment difficulties that arise. Inevitably, they have arisen and will continue to arise for some. The industry also noted that the level of long-term mortgage arrears is declining and, based on the most recent data published by the Central Bank last Friday, it is the case that the number of mortgage accounts in long-term mortgage arrears is continuing to fall. At the end of last June, 21,400 primary dwelling mortgage accounts were in long-term arrears, which represents a reduction of almost 1,400 in the first half of the year. As recently as the end of 2021, there were almost 27,000 accounts in long-term arrears. Nevertheless, some borrowers are currently under real pressure and, for this reason, I called on the industry to demonstrate that it is delivering for its borrowers and that it bring forward new measures to provide further supports and certainty for its customers at this time.

Arising from that meeting, on 6 September, BPFI announced a number of further initiatives by the mortgage industry. As part of that announcement, a second phase of the Dealing With Debt campaign was launched to highlight new and existing supports for concerned mortgage customers. The further initiative was announced by BPFI for the closer engagement between MABS and credit servicing firms on a streamlined customer engagement framework to accelerate the agreement of sustainable repayment plans for customers in financial difficulty, which is welcome. The emphasis has to be on sustainable repayment plans.

In relation to switching, all current mortgage lenders - AIB, Bank of Ireland, Permanent TSB, Avant Money, Finance Ireland and ICS Mortgages - have agreed initial eligibility criteria to provide clear guidelines for home mortgage customers of credit servicing firms or other non-lending regulated entities who are seeking to switch their mortgage. In my view, this is a breakthrough and a very welcome development.

Separately, Pepper Ireland also launched a new fixed interest rate alternative repayment arrangement option that may be available to assist its customers in significant mortgage difficulty. When applied, this will see the variable interest rate on a customer's mortgage temporarily discounted and fixed at a reduced interest rate for a period of up to two years. This is a welcome and badly needed initiative from Pepper, and I hope other mortgage entities will add this type of arrangement to their suite of alternative repayment arrangements. Borrowers in difficulty need this type of certainty and I encourage Pepper to provide further clarity on the rate, who will qualify and what the eligibility criteria will be for people facing distress or currently in distress to avail of that two-year fixed rate as an alternative repayment arrangement. As Minister, I will be keeping a close eye on the number of customers who are in a position to access this new arrangement.

All regulated entities, including banks, other regulated mortgage lenders, loan owners and servicers, are required as a matter of law to follow the statutory Central Bank codes of conduct, including the code of conduct on mortgage arrears, CCMA, and the consumer protection code. These codes are not voluntary and there can be no question of the regulated owners not following them. The CCMA, in particular, provides very important protections for co-operating mortgage borrowers who are experiencing repayment difficulty. A borrower does not need to be in arrears to avail of the CCMA provisions and protections, and it is important we all amplify that point for people who are facing real distress, if they are not yet in arrears. The CCMA makes clear that regulated entities, including servicers and loan owners, must treat their borrowers in or facing mortgage arrears with due regard to the fact that each case of mortgage arrears is unique and needs to be considered on its own merits and handled in a sympathetic and positive manner, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.

These are challenging times for many mortgage holders. Any decision on this needs to be taken in the context of the overall suite of measures that will be announced on budget day, when the Government will set out a comprehensive response to the cost-of-living pressures so many people are facing at this time. We have responded quickly to the cost-of-living pressures, with in excess of €12 billion of measures already implemented since the beginning of last year. Measures including income tax reductions, cuts in childcare fees, increased social protection payments, energy credits, free schoolbooks, cuts in school transport fees, and cuts in VAT and excise on energy and fuel bills have all made a real difference to households throughout the country, including people who are paying a mortgage. I can assure the Dáil that the budget, which is in less than three weeks' time, will include further cost-of-living measures.

On the bank levy, I make clear that the contribution by each bank to the levy was the same in 2022 as it had been the year previously. It has not been cut. The Government did take the decision to remove both KBC and Ulster Bank from the scope of the levy to minimise the potential for disruption in the banking market. Any incentive for those two banks to leave the market more quickly than they eventually did would not have been in the interests of customers. I have stated publicly and repeat in the House this evening that the bank levy will be extended beyond the end of the current year, and I will outline further details on budget day in regard to the amount the levy will bring in next year and the reach of the levy.

I have also strongly encouraged all regulated mortgage firms to engage with the Oireachtas finance committee and to outline the various measures they are deploying to assist their customers.

I know the Governor of the Central Bank was before the committee today. I directly called on all of the non-bank entities that have yet to appear before the committee to do so and to give an account of their actions and face questioning in the same way that other lenders are doing. For its part, the Government will continue to meet this challenge and ensure the frameworks are in place to deal with the difficulties in ways that are effective and fair for all. Our response to the real cost-of-living pressures that people are facing around the country will be outlined in less than three weeks' time, on budget day.

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