Mary White (Carlow-Kilkenny, Green Party)
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Question 98: To ask the Minister for Finance if consideration has been given to seeking agreement from the institutions which have benefited from the bank guarantee that they will review the size of the breakage fees they are charging mortgage holders to free themselves from fixed rate mortgages in order to move to variable rates so as to benefit from the fall in interest rates. [12446/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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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 the mortgage, does not need to be concerned with changes in mortgage interest rates and accordingly, can budget more confidently. Anyone taking a fixed rate mortgage knows that they are ensuring certainty for their payments over the period.

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, where a customer changes from a fixed interest rate contract to a variable rate contract before the end of the term for which the interest rate was fixed, there is an associated cost to the lender. In circumstances that lenders were prohibited from passing on this cost to borrowers switching to variable rates, this cost could increase the price and reduce the availability of fixed rate mortgages.

The Deputy will appreciate that a balance must be achieved by Government between influencing private banks through the bank guarantee scheme and other financial support incentives while at the same time being seen to have a hands-off approach to the day to day running of these institutions which must operate on a strictly commercial basis. I have not discussed this issue with any representatives of the credit institutions covered by the bank guarantee scheme and I have no plans to seek to impose this requirement on any credit institution.