Gerald Nash (Louth, Labour)
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90. To ask the Minister for Finance if his Department or the Central Bank has undertaken, or plans to undertake, an analysis of the potential impact of rising ECB interest rates on Irish mortgage holders; his views as to whether the Central Bank will require additional regulatory powers to protect those with variable and tracker mortgages from rising rates, given the lack of competition in the banking sector; and if he will make a statement on the matter. [55833/22]

Gerald Nash (Louth, Labour)
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Homeowners are scared stiff of the threat of rising mortgage interest rates. Markets expect the ECB to continue raising rates until the middle of next year, with a peak of 3% anticipated. Tracker mortgage holders, as we know, have already felt the impact, and variable-rate mortgage holders are next in the firing line. Has the Minister's Department carried out any assessment at this stage of the impact of rising rates on Irish mortgages? Will the Central Bank require any more tools, in the Minister's view, to help to protect vulnerable mortgage holders in the time ahead?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy for raising that point. Yes, of course we are monitoring the impact that rising interest rates are having on the cost of living and on families, households and businesses. The Central Bank has not approached me looking for additional powers or tools to deal with the consequences of that impact.

As the Deputy will be aware, the code of conduct on mortgage arrears already sets out the provisions under our consumer protection code to help borrowers in borrowing distress. We recognise the great difficulty that is there. As Deputy Nash will know, however, in February 2017 a number of increased protections for mortgage holders were brought in. Those measures were then provided for in an addendum to the consumer protection code of 2012. That brings forward measures that aim to improve the level of information provided to borrowers on variable rates annually. It also indicates the responsibilities that sit upon banks when dealing with mortgage holders who find themselves in the position of distress to which the Deputy refers.

I appreciate the seriousness of this matter. I believe that the consumer protection provision we have in place is adequate. I do not believe that bringing in new changes to our tax code is appropriate at the moment. I believe that the cost of doing so would be very high and that the measures we have in place in our protection code for consumers, for our citizens, are adequate. They will always be monitored and kept under review.

Gerald Nash (Louth, Labour)
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To be clear, I am not specifically requesting that the Minister introduce any change to the tax code in this regard. I have never requested that. That is not what my question seeks to do. Thankfully, the main lenders in the market have held off raising their variable mortgage interest rates to date, but I think there is a certain inevitability that those rates will rise over the coming period. Figures released by the Central Bank yesterday show that the average rate for new mortgages fell by six basis points compared with the figures in August, and that is a good thing. We are moving now towards more of a European norm in respect of variable mortgage interest rates. That said, the reality is that we will probably move back to where we were over the past few years when banks inevitably increase mortgage rates over the coming period. There are 250,000 people on trackers. After the most recent ECB hike, a couple with about €200,000 left on their mortgage could end up paying the equivalent of three weeks' wages more in mortgage repayments later this year. Loading those kinds of repayments on already stretched households could be the straw that breaks the camel's back. I ask the Minister to keep a watching brief on this with the Central Bank.

Paschal Donohoe (Dublin Central, Fine Gael)
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Very much so. As I said, we will continue to monitor the adequacy of the consumer protection code that is in place. I believe, however, that it is robust and that the Central Bank and other authorities will take very carefully their responsibilities to ensure that borrowers who find themselves in positions of distress receive the necessary information and are made aware of the options available to them.

I appreciate the Deputy's acknowledgement of some of the changes that have taken place in our mortgage market recently. It is worth noting that the differential between the Irish and the average euro interest rate for new mortgages declined from 1.4% at the end of 2021 to 0.4% at the end of August of this year. I hope that this kind of narrowing will play a role in moderating what I know will still be considerable difficulty for many households and for businesses. We will monitor the code that is in place, but I believe it is fit for purpose to deal with the challenges that could develop.

Gerald Nash (Louth, Labour)
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I think it is inevitable that the main banks will pass on the likely increases in the ECB rate over the coming period. The perverse reality is that the environment we are in at the moment, as interest rates go up, means that bank profitability will go up as well. I would like the Government to send a signal, and this House should send a signal, that banks should, given the climate at the moment, absorb as many of these interest rate rises as they possibly can and avoid passing them on to variable-rate mortgage customers, especially at this really difficult time. Given the normalisation, if we can call it that, of mortgage interest rates in Ireland at this point in time, the likelihood is that we will go back to the point at which we had been, with the second highest rates in the eurozone over the last few years, when interest rate rises are passed on, and in the context of the fact that Ulster Bank and KBC are exiting the market. It is inevitable that the mortgage lenders there at present will take advantage of and exploit that and exploit their advantage in the market.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is worthwhile acknowledging, as the Deputy has done, that we have not seen recent decisions made that have led to abrupt changes to interest rates available. I agree, however, with one of the Deputy's points, that is, that in the time ahead it will continue to be important to monitor competitive changes within our marketplace. He is correct in acknowledging that because of the move in Ireland from a five-bank model to what will become a three-bank model, there will be a reduction in the number and diversity of mortgage offerings as the number of banks in our country begins to change. For all those reasons we will continue to evaluate what happens. I go back, however, to the earlier and the important question the Deputy put to me about our consumer protection code and my belief and judgment that it is adequate.