Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

At the outset, it is important to point out that the setting of official interest rates throughout the eurozone is a matter for the European Central Bank, ECB. The ECB recently announced a further 0.25% increase in interest rates, bringing its main lending rate to 4%. The Government has no role in setting official interest rates, nor in setting the retail interest rates that lenders may charge on their loans, including mortgages. The rates charged are a commercial matter for individual lenders and these are usually based on a range of factors including, but not limited to, the ECB rates. The most recent Central Bank interest rate statistics shows the weighted average interest rate on new mortgages charged by credit institutions in Ireland was 3.63% in April 2023. In the context of the rates charged by different types of entities, in relation to outstanding mortgages, at the end of March 2023 the average interest rate charged by banks was 3.20%, and by non-bank regulated entities it was 3.79%. In relation to the non-banks, the Central Bank has broken these down further to distinguish between lending non-banks who provide new mortgages, and non-lending non-banks, NLNBs, which service existing loans but do not provide new mortgages. The Central Bank indicated that the weighted average interest rate on variable rate mortgages charged by the former was 3.73%, and 5.36% by the latter. The Central Bank published further data on 8 June 2023 indicating that the dispersal of interest rates by the NLNBs was much greater than that of either the banks or the lending non-banks. This means that the NLNBs had a greater number of mortgages at both higher and lower interest rates, that is, as at end March 2023 about 12% of their mortgages had an interest rate of 1% or lower, whereas another 26% of their mortgages were at an interest rate of over 5%. By contrast, the interest rates on most of the mortgages held by both banks and lending non-banks were between 2% and 5%. The Central Bank indicated that this reflects two main factors, including the huge amount of variable and tracker mortgages held by the NLNBs. At the lower end of the interest rate distribution, the key focus of these entities on non-performing loans revealed a large cohort of accounts on zero interest rates.

Nevertheless, the Government appreciates the additional pressure recent interest rate increases have had on many people. The consumer protection framework seeks to ensure that all Central Bank regulated entities 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. The framework applies to all Central Bank regulated entities that provide mortgage or other credit to consumers. Where a loan is sold or assigned to another entity, the relevant borrowers maintain the same regulatory protections that they had when the loan was originally made, including under the various Central Bank statutory codes of conduct such as the Consumer Protection Code and the Code of Conduct on Mortgage Arrears, CCMA. In particular, the CCMA provides specific protections for borrowers in arrears or facing a prospect of arrears on a loan secured on a primary residence. All relevant regulated entities must proactively encourage borrowers to engage with them about financial difficulties that may prevent the borrower from meeting his or her mortgage repayments. Where a borrower is experiencing repayment difficulty, a regulated entity must explore all of the options for an alternative repayment arrangement, ARA, offered by the entity to determine if a more suitable and sustainable repayment option is available based on the borrower’s individual circumstances. If a borrower is not satisfied with the options proposed or if the regulated entity declines to offer an ARA, an appeals mechanism is provided for in the CCMA. In addition, a regulated entity must review an ARA at intervals that are appropriate to the type and duration of the arrangement, including at least 30 calendar days in advance of an ARA coming to an end.

The Central Bank has advised that it expects all regulated entities to take a consumer-focused approach in respect of any decision that affects their customers. In particular, it indicates that the protection of mortgage loan borrowers, including those in arrears, is a key priority, and that it will continue to supervise compliance by all regulated entities with the CCMA, Consumer Protection Code and other relevant financial services legislation. I encourage anyone who is experiencing a repayment difficulty, or who has any other genuine concern in relation to their mortgage, to contact their mortgage creditor to discuss the matter in the first instance. It is imperative that Central Bank regulated entities constructively engage with their borrowers to address any legitimate concern raised and to act fairly in the interest of their customers. That is what they are required to do under the Central Bank consumer protection framework, and it is the minimum standard that Central Bank-regulated firms are expected to comply with.