Robert Troy (Longford-Westmeath, Fianna Fail)
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10. To ask the Minister for Finance if he is actively pursuing plans to force banks to reduce variable interest rates for mortgage customers; if he is concerned by the high rates charged by banks that are no longer active in the new mortgage market, and are therefore not subject to competition pressure; and if he will make a statement on the matter. [40357/15]

Robert Troy (Longford-Westmeath, Fianna Fail)
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Will the Minister continue to pursue plans to force the banks to reduce the variable interest rates charged? Is he concerned about the high interest rates being charged by banks no longer active in new mortgage markets and, therefore, are not subject to competition pressure and will he make a statement on the matter?

Michael Noonan (Limerick City, Fine Gael)
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I thank Deputy Troy for raising this matter. It is a very important issue for many constituents of all Deputies. As the Deputy knows, I have taken steps to ensure that the banks provide options for mortgage holders to reduce their monthly repayments. Last May, I requested a report from the Central Bank on the topic which was subsequently published. I also met with the six main mortgage lenders in May and outlined my view that the standard variable rate, SVR, being charged to Irish customers was too high. 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 SVR customers.

In September, I concluded a series of follow-up meetings with these banks and the reality is that the majority have put options in place to allow borrowers reduce their repayments. These options range from lower variable rates to new suites of variable rates based on loan-to-value and reductions in fixed rates.

While I did not meet all mortgage providers operating in Ireland, I met with those which cover the majority of the mortgage market. Furthermore, these meetings should impact on other lenders in the market. I expect that changes to interest rates by the main lenders should drive competition in the mortgage market and exert downward pressure on other lenders to reduce their rates in line with other providers.

I, therefore, encourage borrowers to contact their bank to see what is available to them in their circumstances or consider moving to another bank, where possible, if the offer is not satisfactory.

Central Bank research suggests that 21% of existing private dwelling house, PDH, variable rate mortgage customers could save by switching their provider. Many of those who cannot save by switching are on tracker rates where the interest rate is already low or have SVR rates but with small remaining balances. I would encourage customers to see if there are options available to them to reduce their repayments by switching provider. I expect that if financial institutions are convinced that there is a threat that they will lose existing customers, they will reduce the rates they currently charge such customers. The Competition and Consumer Protection Commission, CCPC, website www.consumerhelp.ieis a valuable source of information on the rates charged by various financial institutions.

Additional information not given on the floor of the House

The reality is that the majority of mortgage lenders have put options in place to allow borrowers reduce their repayments. Therefore, I do not consider it necessary to take any further action at this time but my Department continues to keep the situation under review.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Minister for his response. He is right, it is a very big issue because 300,000 households with young families are being screwed and crippled by interest rates. In some instances, the interest is twice the rate of that in other EU member states. Some people are paying €4,000 a year on a €200,000 mortgage more than is being paid in Northern Ireland. That is not fair. The Minister talks about his modest reductions in the universal social charge, USC, in the budget but can he imagine what an extra €4,000 a year would do for many families who are struggling? He said he concluded a series of meetings in September but the consequence of these meetings was a totally inadequate response from the banks. The meetings were about as useful as an ashtray on a motorbike because the interest rates are still too high and are crippling people. The Minister talks about the reduction in fixed rate interest rates but that does not suit everybody. He talks about switching mortgages but that is not suited, or open to, people in mortgage arrears or negative equity.

This party produced legislation earlier in the year which would have given power to the Central Bank to intervene. It is time the Minister enacted that legislation.

Michael Noonan (Limerick City, Fine Gael)
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We asked the Central Bank to review the situation in the spring and it turned down the offer to become the authority that regulated interest rates. It thought this was a very bad idea and that competition in the market is the best controller of interest rates and the products offered. All the main lenders, AIB, Permanent TSB, Bank of Ireland and the others, made new offers after their meetings with me. Some of them reduced their rates by up to 20%, which is a significant reduction. We will not get the rates down to the European average, which the Deputy described, because the business in Ireland has come through a catastrophe and there are so many arrears on loan books on mortgages that the costs to the mortgage providers in Ireland are significantly higher because they are dealing with bad books. They are dealing with arrears, which is the key issue. I constantly monitor this and have regular meetings with the main banks and will continue to do so. It will be an agenda item for forthcoming meetings, as it was in the past. Significant progress has been made and the Deputy should encourage those who talk to him to avail of the new offers because there seems to be considerable reluctance to switch even when it is in the interest of customers.

The total figures are not as big as the Deputy says. The fixed mortgages are at very low interest rates. Some elderly or middle aged people have a very small balance left on their variable rate mortgages and do not think it is worth changing their relationship with their bank managers. There is a cohort of people adversely affected and I am addressing their needs.

Robert Troy (Longford-Westmeath, Fianna Fail)
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There are 300,000 households on variable interest rates. Only 700 people switched their mortgages to date this year. That is minimal. People do not switch because of the charges associated with switching, legal fees, valuation and other professional fees that are involved. People in negative equity and those in mortgage arrears cannot change because no financial institution wants to deal with them. The Minister has the power to instruct the Central Bank to intervene. Intervention is needed.

The legislation we proposed was balanced correctly because it acknowledged the obvious need for the banks to be profitable but it also acknowledged the rights of consumers to be treated fairly because they are not being treated fairly. The Minister talked about the difficulties the banks have gone through but AIB recently announced that it raised €750 million at a cost of 0.66% per year. It is able to raise money at an extraordinarily low interest rate but it is charging 3.6% to hard pressed struggling families. They should not be the ones left to shoulder the responsibility and help dig the banks out of the mess they created for themselves.

Michael Noonan (Limerick City, Fine Gael)
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As I said to the Deputy, it is a major cause of concern in certain households. I am very much aware of the concern he expresses and I will be in constant dialogue with the bank, but the solution is more competition. The different banks cannot offer the same product at the same price because if they do, there is no competition. I want them to offer different products and if there are price variations, that is the competition but people must be willing to switch. It is a question that needs to be addressed by the advocates in terms of saying that this is a major crisis. If the Deputy's figure is correct, why did only 700 switch from a particular bank? One possible answer is that interest rates across the world are at an historic low even though the comparative interest rate between here and the European Union is high. The Deputy should ask his parents' generation what they were paying on their mortgage and he will see that. Interest rates are at an historic low.

Robert Troy (Longford-Westmeath, Fianna Fail)
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What balance did they have? It cost £4,000 to buy a house.

Michael Noonan (Limerick City, Fine Gael)
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One possible explanation for the anomaly the Deputy is raising is that many people are happy with the interest rate they are paying, especially if there is a small balance left on their mortgage, and they will not switch for small rewards.