Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 176: To ask the Minister for Finance the steps he will take to change the penalty system imposed by banks on people with household mortgages who wish to change from a fixed rate mortgage to the variable rate to avail of more attractive rates; if he has discussed this matter with the banks over the past few months; if he will impose a change in banks now nationalised or recapitalised; and if he will make a statement on the matter. [10132/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have no function in setting interest rates. My function is to provide an appropriate legislative framework for regulation of the financial services sector.

The choice of mortgage product ultimately rests with consumers in light of their assessment of the terms and conditions that their lending institution offers. The decision of borrowers is influenced by a range of factors such as their personal preferences and their own assessment of the relative merits of fixed and variable rate mortgages.

Generally mortgages are for long periods. To some consumers a fixed interest rate on a mortgage offers peace of mind in that the borrower benefits from certainty regarding the cost of their mortgage, does not need to be concerned with changes in mortgage interest rates and accordingly he or she can budget more confidently.

Where a bank offers a fixed rate over a certain period it incurs additional costs in obtaining fixed or other funding in respect of the loan over the period. The additional costs will reflect both the market view in relation to future trends in interest rates for the period and the fact that longer term deposits generally attract higher interest rates than short term. In addition, if a borrower wishes to break a fixed interest rate contract prior to the end of the agreed term in order to change to a variable interest rate contract, it will generally result in funding costs for the lender concerned. The lender in turn will seek to recoup these costs from the borrower. These funding costs do not require the Financial Regulator's approval. However, the Financial Regulator's approval must be obtained for any additional administrative type charges imposed on borrowers for breaking fixed rate contracts.

I have not discussed this issue with any representatives of the banks and I have no plans to seek to impose this requirement on any credit institution.

Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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Question 177: To ask the Minister for Finance his views on the banks revaluing existing properties subject to household mortgages and resetting the mortgages to take account of the current value to ensure that thousands of families here will not face repossession proceedings due to defaulting on payments in view of the financial recession; and if he will make a statement on the matter. [10133/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I have no function in relation to revaluing existing contractual commitments between lenders and borrowers. My function is to provide an appropriate legislative framework for regulation of the financial services sector.

Recent cuts in the main ECB rate have helped to reduce the monthly mortgage repayments for those on variable rate and tracker mortgages.

Successive budgets since 2006 have increased the level of mortgage interest relief available to first-time buyers to refocus this relief towards home owners who are in most need of assistance.

In terms of ensuring that people can continue to afford their mortgages the Government provides support for payment of mortgages under the Mortgage Interest Supplement Scheme. This scheme is administered by the Community Welfare Service of the Health Service Executive on behalf of the Department of Social and Family Affairs. It provides assistance where the mortgage relates to a person's principal private residence.

Furthermore, people in debt or in danger of getting into debt can avail of the services of the Money Advice and Budgeting Service (MABS). This is a national, free, confidential and independent service. In 2009, almost €18 million has been provided to assist MABS with its workload.