Michael McGrath (Cork South Central, Fianna Fail)
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98. To ask the Minister for Finance the number of banks with which officials of his Department have met which have made a definitive commitment to reduce their standard variable mortgage rate, as distinct from offering new fixed rates to customers; his views on the outcome of these discussions; and if he will make a statement on the matter. [24812/15]

Michael McGrath (Cork South Central, Fianna Fail)
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This priority question relates to the issue of standard variable rate mortgages and, in particular, the issue of the excessive variable interest rates being charged by banks in Ireland to approximately 300,000 variable rate customers. The Minister concluded a series of meetings with the banks about a month ago and they have until 1 July, which is another week or so, to come up with their response to that series of meetings. Is the Minister satisfied with the response so far and does he expect further movement in the next week or so that will result in a reduction in variable rates before 1 July?

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for his question. As he knows, I met with senior management of Ireland's six main mortgage providers in May. The meetings focused on the mortgage market and specifically the comparatively high standard variable rates currently being charged by the banks. I outlined my view that standard variable rates being charged in the Irish market are too high. There was agreement from all lenders that customers should have access to more competitive mortgage products as per my recommendation.

The banks agreed to review their rates and products and, by the beginning of July, to have simple options to reduce monthly mortgage payments for standard variable rate customers. Some of the potential products include lower standard variable rates for existing and new customers, competitive fixed-rate products and lower variable rates based on loan-to-value ratios for new and existing customers. In addition to the issue of interest rates, I also outlined the need for greater competition in the market and the need for a more active and well-resourced advertising campaign by the individual banks, focusing on promoting awareness of their best offering and how easy it is for customers to take up new products and switch between institutions if they wish to avail of better rates.

The position of homeowners who are in negative equity was also discussed, and assurances were sought and received that these homeowners will be able to avail of options to reduce their monthly repayments.

Officials in my Department will review progress over the coming weeks, and a follow-up set of meetings with each of the six banks will take place in September in advance of the budget. Time should now be allowed for the banks to act on this matter. However, it should be noted that the banks have started to make some welcome changes on this issue which should result in real savings for mortgage holders.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for his response. I am sure it will not have escaped him that, so far, not a single bank has reduced its variable interest rate as a result of the meeting held with him, although there is another week to go. AIB had pre-announced a rate cut before meeting with the Minister, while Bank of Ireland has announced a reduction in its fixed rates. To my knowledge, there has been no response from KBC, Permanent TSB, Ulster Bank or ACC.

Is the Minister going to be satisfied with a situation in which banks come out and announce a reduction in their fixed rates? The whole purpose of this exercise was to bring about reductions in the actual standard variable rates. A fixed-rate mortgage is a different product, as customers are locking in for a period. In the case of Bank of Ireland's existing variable rate customers, if they move to a fixed rate they have to lock in for two years. That comes at a price and has consequences. The purpose of this campaign is to bring down the actual variable rates themselves, which the Minister himself has acknowledged are too high. If the response remains as it is, with a number of the banks not responding at all, what steps will the Minister take to address the issue?

Michael Noonan (Limerick City, Fine Gael)
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The purpose of the meetings was to ensure that persons with mortgages would get mortgages at cheaper rates. Whether they are variable-rate or fixed mortgages is a matter of choice with customers. A reduction in mortgage rates was the priority of those meetings. While AIB had announced a variable mortgage rate reduction before this series of meetings, I had previously met the incoming CEO of AIB at the end of the process of his appointment and discussed variable mortgage rates with him. At that stage, I got a commitment from him that he would make an announcement that variable mortgage rates would be reduced.

The other banks have responded in various ways. There is obviously an advantage for banks to move to fixed-rate mortgages, which are essentially lower rates than variable-rate mortgages. If the banks have fixed rates over time, they can fund against the fixed rate arrangement at a lower rate than they would fund for variable rates on the market. They have until 1 July and we will see at that stage. The Deputy should remember there is a series of follow-up meetings before the budget in September.

Michael McGrath (Cork South Central, Fianna Fail)
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The Minister may not feel he is in a position to get a response because there is still a week to go. However, I can give a response, which is that, so far, the response from the banks has been deeply disappointing. The fact is a reduction in the fixed rate is not a substitute for a reduction in the standard variable rate. While some customers can make cash savings on their monthly repayments, it comes at a price in that they are locked in for a minimum two-year period. If a new entrant comes into the market and offers variable rates at 3%, they cannot switch because they would have to pay a penalty. This is the point that must be borne in mind. If standard variable rates fall below the fixed rate customers lock in at, then they lose out again.

I do not believe the Minister should accept anything less than reductions in the actual variable rates. The only banks that have responded to some degree so far are AIB in terms of the variable rate and Bank of Ireland with a fixed rate cut, but there is not a dicky-bird - not a word - from the four other banks as to what they are going to do, with just one week to go. We will see what happens in the course of the next week but, on the evidence so far, the response is underwhelming to say the least.

Michael Noonan (Limerick City, Fine Gael)
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As I said, significant progress has been made. A number of banks have offered fixed rate products at much lower rates than the variable rate. I draw attention in particular to the new set of fixed rate offers Bank of Ireland has made and the other banks and mortgage lenders will be coming forward in due course with their proposals. I gave them time and space until 1 July and I also reminded them that I would have a second series of meetings in September. I intend to stick to that schedule.