Jack Chambers (Dublin West, Fianna Fail) | Oireachtas source

I again thank Deputies for speaking to the Bill. I also thank Deputy Boyd Barrett for bringing it to the House. We are all acutely aware of the high mortgage repayments currently faced by some mortgage holders and the stress and hardship this causes for families. The Government has undertaken a number of initiatives, including measures in the budget, to help people impacted by the rise in interest rates. Now that the ECB has reduced rates, the pressure on some of those affected should start to ease shortly.

Nevertheless, it must be remembered that depending upon the terms of a particular mortgage contract, the setting of interest rates is ultimately a commercial decision for individual firms. Creditors take many factors into account when setting and adjusting their lending rates, including the cost of wholesale and retail funds, risk appetite, operational costs, expected return, competition, and desired market segment. However, the Government believes that any move to administratively control interest rates, as proposed in the Bill, should not be undertaken without due consideration of the potential long-term negative impacts for borrowers, the viability of the banks, and the wider good of the economy and our country.

The Government believes that increased competition in the banking sector will, over the longer term, better exert pressure on the banks to reduce mortgage interest rates. Competition to reduce interest rates results in better outcomes for consumers, the economy and the country as a whole. While two banks have left the market in recent times, it is a welcome development that new entrants offering mortgages have increased consumer choice.

In addition, credit unions are emerging as an important sector in the provision of new mortgages. Further evidence that competition works can be seen in the fact that many lenders have recently reduced some of their mortgage rates. This, in turn, encourages their competitors to respond by lowering rates and prompts customers to seek better deals. Capping interest rates would stop lenders competing on interest rates and would also deter new entrants to the market, which would not be in the long-term best interests of consumers.

The Government has already taken action on this issue in last year's budget when the Minister for Finance introduced a one-year mortgage interest tax relief for homeowners within certain limits. The Central Bank consumer protection framework is strong and protects all mortgage borrowers, particularly those borrowers experiencing repayment difficulty. This is currently being reviewed by the Central Bank to ensure it is kept up to date.

Now that inflation is slowing and interest rates are reducing, it is hoped that this trend can be maintained. Some banks have already reduced rates and it is hoped that this can continue. It would therefore be unwise to intervene in the market in the manner proposed by this Bill as it would only stifle competition. The Central Bank has previously expressed its view that administrative controls on interest rates are not compatible with the principle of an open market economy and that it would be akin to taking responsibility for the management of risk, a core function of the financial system and its firms.

For all of these reasons, the Government is opposing this Bill. Overall, it has serious concerns about it and believes that, if enacted, it would be very likely to restrict competition in the market for residential mortgage credit to the detriment of the borrowers and future borrowers it hopes to assist. Nevertheless, with regard to the future evolution of interest rates, the Government is of the view that, where interest rates were increased in tandem with ECB rates, they should now decline in tandem with ECB reductions. The Minister and his officials will continue to work closely with all relevant stakeholders to monitor this issue and to ensure that the existing consumer protection framework continues to provide the maximum possible protection to consumers. We thank the Deputy for raising this issue.

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