Written answers
Tuesday, 25 January 2011
Department of Finance
Mortgage Interest Rates
8:00 pm
Seán Sherlock (Cork East, Labour)
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Question 183: To ask the Minister for Finance his views on the predicted increase in mortgage interest rates in 2011, which will add further financial pressure to hard-pressed homeowners, many of whom it is believed will fall behind on payments or face selling their homes as a result; and if he will make a statement on the matter. [3338/11]
Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Mortgage interest rates are determined by a broad range of factors including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution's overall funding. A balance must be maintained by the Government between support provided for individual banks and financial service providers generally through the bank guarantee scheme, other financial support incentives and broader public policy provisions, while at the same time, ensuring that the day-to-day running of these institutions has regard to competition, market conditions and the need to develop stable commercial enterprises to meet the long term credit needs of households and business in the Irish Economy. In this regard, as Minister for Finance, I have no function in relation to interest rate decisions made by individual lending institutions at any particular time. Nevertheless, I am acutely aware of the difficulties faced by mortgage-holders and, of course, interest rate increases will place a further financial strain on those affected.
The Deputy will be aware of the Mortgage Arrears and Personal Debt Expert Group, which I set up in February 2010. The Deputy will also be aware that the Expert Group produced two reports, which can be accessed at www.finance.gov.ie.
Since the publication of the reports, the Code of Conduct for Mortgage Arrears (CCMA) has been revised by the Central Bank to reflect many of the recommendations of the Expert Group including key recommendations relating to the introduction by all regulated lenders of a standardised Mortgage Arrears Resolution Process (MARP). The most significant changes in the revised CCMA include: - borrowers in arrears who co-operate with the Mortgage Arrears Resolution
Process (MARP) will not be charged penalty interest charges; - harassment of borrowers through unsolicited communications will be outlawed;
and - borrowers in financial difficulties, but not in arrears, will be allowed to participate
in the MARP. The revised CCMA came into effect on 1 January 2011 and can be accessed at www.centralbank.ie. Lenders are required to comply with the CCMA as a matter of law but have been given a period of six months' grace, ending on 30 June 2011, to put in place the requisite systems and training of staff necessary to support the implementation of the MARP. Failure to comply with the revised CCMA may result in sanctions under the Central Bank's administrative sanctions framework.
It has already been indicated by the Minister for Justice and Law Reform to the House on several occasions that he intends to give early attention to the recently published Final Report on Personal Debt Management and Debt Enforcement of the Law Reform Commission. That Report contains recommendations on comprehensive reform of the system of personal insolvency law in Ireland.
Other important measures in place to assist consumers who have fallen into arrears or who are experiencing difficulties servicing their mortgage repayments include: - the Mortgage Interest Supplement (MIS) Scheme, which currently supports
approximately 18,000 mortgage-holders; and - the Money Advice and Budgeting Service (MABS), which provides a national,
free, confidential and independent service. MABS has 53 offices nationwide and
also operates a helpline to assist people with debt problems.
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