Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank the Minister of State for being here to take this question. It is critically important that we continue the downward pressure on interest rates in Ireland. I acknowledge significant progress has been made in recent times in reducing mortgage interest rates across this country and bringing them somewhat more in line with EU averages but, unfortunately, we are still above EU averages.

As the Minister of State knows, we are now at a time when the banks are very profitable. The State has divested its interests in AIB recently and, of course, in Bank of Ireland previously.

It is critically important that the focus does not slip in respect of mortgage interest rates. This topic has been raised many times over the years in this Parliament. It has been highlighted repeatedly. Progress has been made, and I acknowledge that. However, we have to continue to shine a light on this to ensure that mortgage rates continue to fall.

As we know, mortgage repayments represent a very sizable part of household expenditure on a monthly basis - the basket of expenditure. It represents a very high proportion of that. Of course, we have seen recently that Ireland is a very expensive country in general compared with other EU member states. We are the second most expensive country in the EU, and that is a significant issue.

Regarding interest rates, it will alleviate the pressure on many households if we as a Government can continue to put pressure on to ensure that mortgage interest rates continue to fall. Figures in April show that the average mortgage interest rate in this country was 3.7%. That has probably fallen since April, and that is very welcome. However, we are still below the EU average. Our interest rates are the fifth highest in Europe. Some countries in the EU are paying less than 2% on average in their mortgage interest rates, which is a significant difference.

There have been new entrants into the market in Ireland, and that is very welcome. Hopefully that has contributed to the downward pressure on interest rates.

It is a critically important area. I want to ensure that the Government continues to pressure. That is the reason I am raising this as a Topical Issue. While progress has been made, it would be very easy for us to take the foot off the pedal on this issue, but that is not what we should do.

While there is momentum on this issue and progress is going in the right direction, we must continue to ensure that we move to be more in line with EU averages. As I said, the banks are now in a very healthy position and back in a very profitable position. As we know, there is talk of executive salaries increasing significantly. While that type of narrative is out there, it is critically important that the end customer sees the best value for money possible in relation to banks. Of course, the mortgage payment is the most essential part of that for most customers across this country. I ask the Minister of State to please keep the focus on this issue. I look forward to his reply.

Jerry Buttimer (Cork South-Central, Fine Gael)
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I thank Deputy McGrath for raising this very important issue. I am taking the matter on behalf of the Minister. As Deputy McGrath will know, the formulation and implementation of monetary policy is an independent matter for the European Central Bank, ECB. As it sought to combat excessive inflation, the ECB increased official interest rates on ten occasions, to 4.5%, in the period 2022 to 2023. However, since last summer, the ECB has reduced its official rates on eight occasions and, together with a change to the way it implements its monetary policy, this has had the effect of reducing its main official lending rate by 2.35 percentage points, to 2.15%.

Official interest rates influence the level of interest rates in the wider economy. However, other economic and business specific factors, such as the cost of funding, market conditions and contractual frameworks, will also influence the retail rates charged by individual lenders. Therefore, in a market economy, the determination of retail and business lending rates are commercial decisions for individual creditors. The Minister for Finance has no specific function or role in such decision-making matters by credit institutions or other mortgage entities, except in the case of most tracker mortgages, where the contractual terms of the mortgage provide that the interest rate will adjust in line with changes in the main ECB lending rate. The contractual provisions of other types of mortgages usually afford a greater degree of flexibility to the mortgage provider in the adjustment of interest rates. Accordingly, the determination of the initial interest rate and the contractual positions for the subsequent adjustment of the interest rate in non-tracker mortgages is a business and contractual matter for the individual lender. In the case of a fixed-rate mortgage, the contractual terms will provide that the interest rate will not adjust during the period the interest rate is fixed.

The latest publicly available data on retail mortgage interest rates, published last week by the Central Bank of Ireland, is for April 2025 and indicates that, overall, the average interest rate on new mortgages in Ireland was 3.72%. This represents a reduction of five basis points, from 3.77% in March, and is 52 basis points lower in annual terms and demonstrates a sustained reduction. The equivalent euro area average increased slightly last month to 3.34%. While acknowledging that the euro area average rate is somewhat lower than in Ireland, it is worth pointing out that the vast majority of new Irish mortgages, some 81%, are now at a fixed rate, up from 70% in April 2024. This will protect borrowers in the event of a rise in official and market interest rates, at least for the period the interest rate is fixed. In addition, the weighted average interest rate on a new fixed-rate mortgage agreement was 3.55% in April 2025, three basis points lower than in March this year and 58 basis points than in April 2024, which also makes for encouraging news for borrowers.

Regarding interest rates on an outstanding mortgage, Deputy McGrath may wish to note that at the end of March 2025 the average mortgage interest rate with banks was 3.5%. However, the national interest rate on mortgages with non-banks was higher, at 4%. In relation to variable mortgage rates, options are also available for some borrowers, in particular creditworthy variable rate mortgage borrowers who have now built up equity in their home, to look at alternative mortgage options to reduce their mortgage costs. In this context, new lenders have entered the market. This is providing more competition and, in turn, may provide better value to consumers. Other lenders are also enhancing their presence in the market, including one particular entity that is now moving to provide a fuller range of banking services to Irish financial consumers. Furthermore, established and relatively new mortgage lenders are increasing the range of their mortgage offerings and a wide range of mortgage types, with different types of interest rate product, LTV products and green mortgages now available.

While interest rates increased in the period 2022 to 2023 and were challenging for the mortgage market, the most recent reduction in mortgage rates in the past 12 months will help many borrowers. Despite the inflation rate fluctuations, the mortgage market has remained resilient over this period. New residential mortgage lending amounted to almost €12.6 billion in 2024, compared with €8.4 billion in 2020. I have a substantial further contribution to provide to Deputy McGrath and I am happy to give it to him later. I thank him for raising this matter. He is right that it is a very important issue we need to keep on top of.

Séamus McGrath (Cork South-Central, Fianna Fail)
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I thank the Minister of State. His reply very much focused on the climate of reducing interest rates we are now in. As I said in my initial remarks, this is very welcome and exactly why it is important to raise this point now. The Minister of State referred to the ECB reducing interest rates on eight occasions since last summer, and again this is all very welcome. The ECB covers the entire EU, though, so this begs the question as to why Ireland is still higher on average than the rest of the EU in terms of interest rates. As I said, we are the fifth highest, albeit with progress having been made. The Minister of State repeated the figures I gave in relation to the April figures. For new entrants into the mortgage market for new mortgages, 3.72% is our average, whereas the EU average is 3.34%. This is approximately 0.4 percentage points of a difference per month, and on a mortgage of €300,000 represents a difference of more than €100 per month in repayments. It is a significant difference for mortgage holders across this country.

Why are we outliers in Europe in relation to our mortgage interest rates? Despite the fact we have reduced the difference and the disparity, we need to continue this pressure. I accept the Minister does not have a direct role in this; of course I do. As we know, however, mortgage interest rates have been debated over and over again in this House and across this Parliament over many years. This pressure has been applied and has made a difference. I want to raise this matter now and it is timely to do so. While we are in a climate of reducing interest rates, we need to reduce the differential between Irish mortgage interest rates and EU mortgage interest rates. This is something in which the Government has a role to play indirectly in terms of highlighting the issues and reminding the banks of their responsibilities to Irish citizens to ensure they give the best possible value for money and that we are more in line with EU averages.

Jerry Buttimer (Cork South-Central, Fine Gael)
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The Deputy is right to raise the matter. It is an issue vexing many of our neighbours and friends. The Government is acutely aware of the impact of the rising interest rate environment and the strain it has caused for some borrowers, and has responded with various initiatives to assist those affected. Following engagement with the then Minister for Finance in 2023, the mortgage industry put in place several measures to assist their customers experiencing difficulties to provide enhanced clarity on eligibility criteria for switching mortgages.

I emphasise that all regulated entities, including banks, other regulated mortgage lenders and loan owners and services, are required as a matter of law to follow the statutory Central Bank code of conduct, including the code of conduct on mortgage arrears and the consumer protection code. These codes are not voluntary and there can be no question of regulated loan owners not following them. The failure to do so can result in the Central Bank of Ireland using its range of powers to ensure adherence to codes, including its administrative sanctions, procedures or legal actions where appropriate.

In addition to the protections available to consumers under the financial legislation and regulatory framework, a consumer also has recourse to the Financial Services and Pensions Ombudsman, FSPO. If consumers are not satisfied with how a regulated firm is dealing with them in relation to the handling of their mortgage or believe a regulated firm is not following the requirements of the Central Bank codes and regulations under financial services law, they should make a complaint directly to the regulated firm. If consumers are still not satisfied with the response, then there is an option to go to the independent financial services office provided for in law to adjudicate on complaints consumers have with regulated financial services providers.

Again, recent Central Bank data indicates that the average interest rate on outstanding mortgages held by bank and non-bank regulated entities has declined over recent years. Deputy McGrath is right to raise this matter. We cannot be complacent. We have an obligation to ensure we advocate on behalf of and work for our constituents and people we know well. The decline in this regard is a welcome one and, from a general perspective, the ECB is reducing official interest rates and the Government expects all mortgage creditors to keep their lending rates under review. Where mortgage rates had in the past increased in line with ECB increases, they should now in the new interest rate environment also appropriately adjust downwards. The Central Bank will continue to liaise with regulated entities on this matter.