Dáil debates
Thursday, 5 October 2023
Ceisteanna Eile - Other Questions
Mortgage Interest Rates
11:25 am
Aindrias Moynihan (Cork North West, Fianna Fail)
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86. To ask the Minister for Finance what his engagement to date has been with the Central Bank of Ireland and the Irish banking sector to increase the availability of long-term, fixed-rate mortgages; and if he will make a statement on the matter. [43146/23]
Aindrias Moynihan (Cork North West, Fianna Fail)
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I want to get an outline of any engagements the Minister has had with the Central Bank and the banking sector regarding increasing the opportunities and availability of long-term, fixed-rate mortgages of ten, 15 or 20 years, and the availability and certainty that would provide for homeowners.
Michael McGrath (Cork South Central, Fianna Fail)
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The retail banking review last year highlighted the change in the Irish mortgage market, with the increased level of fixed-rate mortgages. A significant portion of new mortgages, some 85% in July of this year, are now fixed-rate mortgages. This will protect borrowers in the event of a rise in official and market interest rates, at least for the period that the interest rate is fixed. The review noted that there have been innovations in recent years in the mortgage market, from the introduction of long-term fixed rates, mainly by non-bank players. The review also included the recommendation targeted at the retail banking sector to review its existing mortgage product suite to identify opportunities to enhance and expand it for the benefit of bank customers. However, neither the Central Bank nor I have a statutory role in determining the products that lenders provide to their customers as these are commercial decisions for the firms themselves. This also extends to lenders in which the State has a shareholding as these entities must also be run on a commercial and independent basis. Their independence in this context is protected by the relationship framework agreements in place.
The weighted average interest rate on new fixed-rate mortgages was 4.04% in July, which is the most recent available data. This represents an increase of two basis points from June and is 154 basis points higher on an annual basis. The Government is acutely aware of the impact that increases in interest rates and the cost of living more generally are having for many mortgage holders. In that context, I recently met the banks and the other mortgage creditors and made it clear to them that they need to be aware and conscious of these difficulties for their customers and be prepared to respond in a meaningful way. I also indicated that all credit providers should be open to considering applications for new mortgages from all creditworthy borrowers. This includes any borrower whose mortgage is currently serviced by a credit servicing firm or other regulated entity that does not provide new credit. In addition, the Central Bank's regulatory framework requires that lenders are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle, whether borrowing, switching or facing arrears.
Aindrias Moynihan (Cork North West, Fianna Fail)
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I will focus on the long-term fixed-rate mortgages of ten, 15 or 20 years. Has the Minister had an opportunity to discuss such mortgages with the Central Bank and the lenders? I understand he is not able to compel lenders to make different products available but I want to get an understanding of the possibilities of having such mortgages and the demand for them. With the ECB rate continuing to rise, many homeowners are under increasing pressure and are looking for solutions and a level of certainty for future repayments. Such mortgages could offer such an opportunity. Has the Minister discussed these types of mortgages with the lenders? Has he determined what level of demand for them there was when the lenders started to consider these products some years ago and whether they will make more of them available in the years ahead?
Michael McGrath (Cork South Central, Fianna Fail)
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I would welcome the introduction of more long-term fixed rate mortgages in Ireland in terms of the offering by the lenders. It de-risks a mortgage for a borrower if they can know with certainty what their repayments are going to be for the next five, ten or 15 years. It offers them certainty and there is real value in that. It is also important to highlight the role the credit unions are increasingly playing in the mortgage market. A number of them are already providing mortgage products. Through the work of the Minister of State, Deputy Carroll MacNeill, I envisage that the number of credit unions offering mortgages will increase significantly over the period ahead. There is a significant initiative under way to improve collaboration across the credit union movement to ensure there is a revised offering available for customers. Credit unions also offer badly needed competition for the main banks in Ireland.
Aindrias Moynihan (Cork North West, Fianna Fail)
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I also want to focus attention of homeowners who are stuck with vulture funds. These funds charge much higher variable rates than many of the other lenders and people are heaped with expensive monthly repayments. This is a huge struggle for many homeowners. More than 100,000 homeowners have found that their mortgages have been sold on. Through no fault of their own, they found themselves part of a loan book of performing and non-performing loans. They are now stuck and unable to switch their mortgage. Has the Minister met the Central Bank and the various lenders to discuss making it possible or more realistic for people to switch from these expensive lenders in order to have more manageable repayments that would allow them to hold onto their homes?
Michael McGrath (Cork South Central, Fianna Fail)
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This is an area where I have been very active. I have met the banks and the non-banks and also MABS, the Insolvency Service of Ireland and the Central Bank at a round-table meeting at the end of August.
One of the outcomes of that was that for the first time we now have an agreed set of eligibility criteria for people whose mortgage is in the non-bank sector to enable them to switch their mortgage to a bank. All of the banks have signed up to that and have committed to implementing those criteria. The Central Bank's initial estimate is that about a quarter, around 27,000, of the mortgages in the non-bank sector currently fall within the scope of the eligibility criteria. Up to now we have seen very low levels of switching from the non-bank sector to banks and that needs to change. There needs to be a genuine welcome and an appetite among banks to receive customers who are within the eligibility criteria and who are currently in the non-bank sector. I will be watching that very closely over the weeks and the months ahead.