Dáil debates

Thursday, 22 September 2022

Ceisteanna Eile - Other Questions

Mortgage Interest Rates

11:10 am

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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101. To ask the Minister for Finance the degree to which Irish mortgage borrowers can expect to be in a position to borrow at a similar rate to those available throughout Europe given their perceived Single Market entitlements; and if he will make a statement on the matter. [46365/22]

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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A pet subject of mine is access to the Single Market, to which we all aspire as members of the European Union. It relates to the costs of borrowing at this particular time with interest rates increasing. In the past we did not always avail of the same interest rates that prevailed in the rest of Europe.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy for raising this matter so regularly with me. I also thank him for his participation and attendance at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on this and other matters which I greatly value.

The Deputy will be aware of the first part of what I am about to say, which is that this is a commercial matter for individual lenders. I cannot determine the interest rates they charge nor indeed is the Deputy asking me to do that. I wish to bring to the attention of the House some changes that have occurred in this area. The interest rates on new mortgages in Ireland are now falling. For example, in July 2022, which is the latest information available to me, the weighted average interest rate was 2.63%, which is down from 2.69% at the end of 2021 and 2.73% in July 2021. Most new mortgages in Ireland are now fixed-rate mortgages and the average interest rates on these mortgages of 2.5% at the end of July is a little bit lower.

While I grant that these are only very gradual and moderate changes, they are in the context of change that has been taking place over recent years where we have seen this gradual change occur. The gap between average Irish and eurozone mortgage interest rates was 1.4% at the end of 2021. At the end of July, it is now 0.55%. That gap has narrowed and has changed. Much could yet happen with those interest rates in the time ahead as the House is aware, but that narrowing has occurred in the recent period due to changes the Deputy is aware of as more fixed-rate products have been accepted by consumers.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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I thank the Minister for his reply, which I fully understand. Unfortunately for some borrowers in this country it would appear that when the interest rates increase across Europe, we get the benefit of parity with them, but that if they are lower than our interest rates, we do not get parity. I appreciate all the reasons and understand them fully. However, under the rules of the Single Market we are entitled to the same as everyone else as it happens, whether we like it or not or whether they like it or not. As I have mentioned previously, a taxation subcommittee of the Parliament is going around Europe at the moment. As has been the subject of various discussions, it will seek to impose wealth taxes on inheritance taxes and increase them in a punitive way. In order to do that, it wants to get control over the financial system and have majority voting apply, in which case it would then determine budgets, taxation etc.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy for his steadfast approach to these matters in recent years. I know he is strongly supportive of the European Union. He equally appreciates that some decisions need to be taken at a national level and we need to protect our right to do so. The Deputy is, of course, correct about the operation of the Single Market. However, national regulators still determine how much capital individual national banks hold, which in turn plays a role in the setting of interest rates in the different jurisdictions. Other institutions and forces are involved in the setting of interest rates.

I go back to the point I made to the Deputy a moment ago. At the end of 2021, the average mortgage rate in the eurozone was 1.29%.

In July it went to 2.08%, so it went up. Across the same period, it has gone from 1.4% at the end of 2021 in Ireland to now 0.55%. That is the narrowing of the differential.

11:20 am

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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I understand and appreciate that. I thank the Minister for his comprehensive reply, but we need to remain vigilant. While we are a committed member of the European Union, and we appreciate all that the European Union has done for us, we are also members of the eurozone and have been committed members of that. As I had to explain to some of our visitors the other day, we stood by and defended it when a lot of other people were attacking it. The fact remains that we must be vigilant.

Photo of Alan FarrellAlan Farrell (Dublin Fingal, Fine Gael)
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I thank Deputy Durkan for tabling the question. Notwithstanding the Minister's response - the narrowing of the gap is very welcome - we are subject to competition in Ireland and that has been our biggest issue because we are such a small country. There has been much talk about banking union, which would have an impact upon the sort of products Deputy Durkan referred to in his question, but also for insurance and assurance. Probably one of the biggest issues at the moment, of which I am sure the Minister is only too aware is liability, in particular for the likes of bouncy castles and all the rest of it. With an open market, we can see other jurisdictions bringing products into Ireland that are not currently available. Notwithstanding the narrowing, as the Deputy has said, there are opportunities for us to be vigilant as to the price volatility.

Photo of Paschal DonohoePaschal Donohoe (Dublin Central, Fine Gael)
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I and the Department of Finance will be forever careful and monitoring developments in this area because it is so fundamental to us. Deputy Farrell made an important point regarding the provision of financial services such as insurance products. I recognise the work the Minister of State, Deputy Fleming, has done in this area where he has been making the case for Ireland as a good place for new insurance services to be provided. He has been successful in supporting and making progress with the availability of insurance products for particular parts of the economy that have been difficult to get. As Deputy Farrell has outlined, I am well aware of the difficulties we have had in getting insurance in some areas in recent years. It is very important that we continue to offer an environment in which a wide variety of insurance services are available within the country. We are also a banking market in which two banks have just left, and we need to be honest in acknowledging the impact that has had and the signals it has sent out about Ireland. That is why now being vigilant, as the Deputy has just said, regarding competition in the economy and the role the three large banks are going to play in meeting mortgage and lending needs for the economy and people is such an important priority for the Department of Finance and for the Competition and Consumer Protection Commission, CPCC, and the work the Central Bank does.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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We now go back to Question No. 100, which Deputy Carroll MacNeill is taking on behalf of Deputy Colm Burke.