Joan Burton (Dublin West, Labour)
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Question 87: To ask the Minister for Finance his views on projections that credit institutions operating here, including those covered by the bank guarantee and participating in the National Asset Management Agency, are likely to increase lending margins on mortgages and other loans by up to 100 basis points over the coming year; if his attention has been drawn to the financial pressure this put on hard-pressed households and businesses; and if he will make a statement on the matter. [5458/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The level of mortgage interest rates reflects a broad range of factors, including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution's overall funding. Decisions on the level of interest rates are taken autonomously by commercial lending institutions and are not subject to direction by the Minister for Finance.

I have already made my views known on the decision by Permanent TSB to increase variable interest rates by 0.5% with effect from last Monday. I repeat that I am disappointed by this decision. Unfortunately, the increase reflects commercial market realities, including the increased cost of accessing funds, notwithstanding the State guarantee.

A balance must be maintained by the Government between supporting banks through the bank guarantee scheme and other financial support incentives and broader policy objectives while at the same time ensuring that the daily running of these institutions recognises commercial realities. Interest rate increases will place a financial strain on some affected mortgage holders. Accordingly, in the revised programme for Government we have indicated that we will be introducing new measures to protect families having difficulties with their home mortgage payments, examining ways of expanding existing options available for dealing with debt and examining ways of expanding existing State-sponsored mortgage support measures.

I approved the setting up of the interdepartmental mortgage arrears review group, chaired by one of my officials for the purpose of bringing together all relevant information in the Departments and examining options, including initiatives in other jurisdictions, relating to support for home owners facing the problems of mortgage arrears and repossessions.

The Law Reform Commission, which is under the aegis of my colleague, the Minister for Justice, Equality and Law Reform, is addressing the issues of debt management and enforcement. In addition, I have discussed with Cabinet colleagues the broadening of the membership of the mortgage arrears review group and I will bring proposals to the Government in that regard.

On the position of mortgage holders generally, the Irish Bankers Federation published a statement of intent on 10 November 2009, agreed and supported by all federation members, which provides further reassurance to home owners genuinely unable to maintain mortgage repayments on their principal private residence.

Additional information not given on the floor of the House.

In addition, the IBF oversight committee on implementing the statement of intent includes representation from the Money Advice and Budgeting Service, MABS. This co-operative approach follows on from the IBF and MABS operational protocol on consumer debt, put into effect in September 2009, which will enable them to work together effectively when dealing with problems of personal debtors who approach the MABS service for assistance.

Other arrangements in place to assist consumers who have fallen into arrears or are in danger of falling into arrears include the mortgage interest supplement scheme, which provides assistance where the mortgage relates to a person's principal private residence, and MABS, which provides a national, free, confidential and independent scheme.

The Financial Regulator's consumer protection code requires that a regulated entity must contact the consumer as soon as it becomes aware that a mortgage account is in arrears and that it must have in place a procedure for handling accounts in arrears. The Financial Regulator also has in place a code of conduct on mortgage arrears which applies to mortgage lending activities to consumers in respect of their principal private residence in the State. This is mandatory for all mortgage lenders registered with the Financial Regulator.

Joan Burton (Dublin West, Labour)
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I note the Minister is very fond of the word "disappointed" with regard to the wrongdoing of Seán FitzPatrick in the window-dressing of the balance sheet of Anglo Irish Bank at the end of a year, as well as the provisions of Permanent TSB to lend money. That was probably one of the most outrageous events in the history of Irish banking when the balance sheet of a major bank was altered, yet all the Minister could say was that he was disappointed. The Minister has again told us today that he is disappointed. Is he disappointed that every Irish banking institution appears ready to increase mortgage lending rates by 100 basis points? Would he agree that these mortgage rate increases are separate to the likely 100-150 basis point increases that are coming down the road from the ECB? Within a relatively short period of time, it is likely that many Irish mortgage holders will be hanging on by their fingernails. Does the Minister agree that keeping a roof over the heads of Irish families has to be public policy, especially when we have already bailed out the banks and will be doing so again?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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There are no indications of any imminent increase in rates at the European Central Bank, but the rates are at very low levels and it is difficult to envisage interest rates remaining at those levels in the medium term. Most Members would recognise that. There is no indication of an imminent change on the part of other Irish banks, but any decision they take will be in the context of the commercial setting in which they operate and the cost of funds to them.

I agree with Deputy Burton's point on the core issue, and that is why there are commitments in the programme for Government — which I outlined in my reply — that keeping the roof over the head of every Irish homeowner is an important policy objective for this Government. That is why we have set up the interdepartmental committee and why we have proposed to broaden its membership. I will be bringing proposals to the Government in that respect in a few weeks.

Joan Burton (Dublin West, Labour)
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This crisis is affecting hundreds of thousands of families, many of whom are also facing severe salary cuts. I received a letter yesterday from a public servant who is going to private lenders to borrow in order to meet mortgage payments. Many of the private finance companies are charging a fee of €30 for every €100 borrowed, but that is the only recourse that many people have, and it is effectively money lending through finance companies.

The Minister referred to a committee in his Department that will deal with mortgage difficulties and mortgage arrears. Is the Minister suggesting, following weekend interviews by the Minister for Communications, Energy and Natural Resources, that he has made contact with Deputy Ryan and invited somebody from his Department to be part of this committee? We have never heard about the make up of the committee. There is no information available and the Taoiseach seemed to be completely at sea, as no proposals had come to the Government about mortgage difficulties.

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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The interdepartmental committee is up and running. The group's terms of reference include consulting with various expert groups as well as examining options to improve State support for homeowners with mortgage arrears, including schemes in operation in the US and the UK. The interdepartmental group is made up of public servants. I discussed the existence of the group with the Minister last week and I indicated to him that I would be bringing proposals to the Government to broaden the membership of the group. I said that in my reply already.

Joan Burton (Dublin West, Labour)
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Would that include his representatives?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would not have thought so, because his Department would not be of direct relevance in this area. However, there was such discussion and I will be bringing proposals to the Government on the issue.

Joan Burton (Dublin West, Labour)
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We previously discussed a two year moratorium. The moratorium currently available is very short and sub-prime lenders do not offer it. Has the Minister done anything about extending the moratorium to two years, as we requested?

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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All these matters are under consideration at the interdepartmental committee.