Gay Mitchell (Dublin South Central, Fine Gael)
Link to this: Individually | In context

Question 52: To ask the Minister for Finance if he has had discussions with the Central Bank and Financial Regulator regarding indebtedness and the criteria for lending products; and if he will make a statement on the matter. [24880/06]

Pat Rabbitte (Dublin South West, Labour)
Link to this: Individually | In context

Question 112: To ask the Minister for Finance if he has had discussions with the Financial Regulator on the subject of interest only mortgages; his views on the fact that interest only mortgages are being encouraged by the banking sector with some banks providing 100 per cent mortgages with interest only repayments; if he intends to take measures to regulate the provision of interest only mortgages on family homes; and if he will make a statement on the matter. [24934/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 52 and 112 together.

As the Deputy will be aware, within the implementation of the overall legislative framework, private sector credit growth and debt levels are, in the first instance, a matter for the Central Bank and Financial Services Authority of Ireland. This follows from its role as part of the European System of Central Banks and its functions, as the Financial Regulator, in relation to the prudential supervision of financial institutions, including mortgage providers, and the protection of the consumers of those firms.

As far as looking after the interests of the individual borrower is concerned, the function of Government is therefore to provide an appropriate legislative framework for regulation of the financial services sector — one that is both comprehensive and robust. I am satisfied that, on foot of the progress made over recent years, especially in establishing the Financial Regulator with a particular focus on the interests of the consumer, we have such a framework in place.

The Financial Regulator has developed a number of specific initiatives to help consumers make informed choices in terms of their financial products. These initiatives have been developed through the framework of the Financial Regulator's "It's Your Money" campaign and have involved publishing consumer guides on credit products, fact sheets, cost surveys on personal loans, all of which are intended to assist borrowers in making the most appropriate credit decisions given their circumstances.

A further strengthening of the regulatory framework for consumers will be achieved through the introduction of the Financial Regulator's proposed Consumer Protection Code shortly. This Code will place obligations on regulated entities that provide mortgages which include the requirement to act in their customers' best interests by ensuring that they seek appropriate information about a consumer so that they know and understand their customers' needs. Such entities must also ensure that the provision of mortgages which are suitable to each individual consumer and that they treat their customers fairly, including by ensuring adequate procedures are in place in relation to the handling of arrears cases. These obligations will be additional to the statutory prior information and warnings required under the Consumer Credit Act 1995.

As far as the choice of mortgage product is concerned, there is a high degree of competition in the Irish mortgage market, providing a wide choice of competitively priced products, including those referred to by the Deputy. The choice of mortgage product ultimately rests with the consumer and the lending institution concerned. The preference of borrowers is influenced by factors such as their personal circumstances and their own assessment of the relative merits of the mortgage products on offer.

It would not be appropriate for me in my role as Minister for Finance to seek to promote one type of mortgage product ahead of another. The information being made available by the Financial Regulator, together with the statutory information and warnings in the case of mortgages, serve as an adequate basis for consumers to make a decision about the type of mortgage which best suits them. Mortgage lending practices are closely supervised by the Financial Regulator with appropriate stress testing of borrowers' ability to meet their obligations, not just in the current economically favourable circumstances, but also in more challenging times.

As the Deputy may be aware, the Financial Regulator has recently announced a technical prudential measure requiring financial institutions to put more capital aside for higher LTV (Loan to Value) loans. This reinforces the message consistently conveyed to lending institutions by the Regulator that mortgage lending policies and practices should be prudent and responsible.

Finally, my Department liaises with the Financial Regulator on an ongoing basis on a range of issues relating to my Department's responsibilities for the legislative framework for the regulation of financial services. The Central Bank's Quarterly Bulletin, Financial Stability Report and Annual Report also play an important role in providing information and analysis to my Department on the exercise of the Central Bank's responsibilities and its assessment of macro economic and financial conditions in the economy.