Billy Timmins (Wicklow, Fine Gael)
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155. To ask the Minister for Finance the position regarding hikes of the interest rates imposed by banks which seem to have no connection with the actual price at which Irish banks are getting their money, mostly through the ECB; if he is planning any action in relation to the sustainable situation of those on variable mortgages and bought their family houses on the pick of the housing market; and if he will make a statement on the matter. [21519/13]

Michael Noonan (Limerick City, Fine Gael)
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I, as Minister for Finance, have no statutory role in relation to the mortgage interest rates charged by regulated financial institutions. It is a commercial matter for the banks concerned. Firstly I must point out that it is not true to say that the Irish banks are funded mostly through the ECB; in fact the Irish banks primarily funded by deposits and other types of market funding.

The Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. The Central Bank has, however, no statutory role in the setting of interest rates by financial institutions, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997.

The mortgage interest rates that financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned. This interest rate is determined taking into account 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.

However, as part of the Central Bank's work on mortgage arrears, lenders were asked to consider all avenues to help customers in arrears, including interest rate reductions. Currently, several lenders do consider a temporary interest rate reduction but this is on a case by case basis.

I can assure the Deputy that the Government is very aware of the significant difficulties some homeowners are facing in meeting their mortgage obligations and it has put in place a comprehensive strategy to address the problem focusing on four main distinct areas:

- Innovative Personal Insolvency Reform: Personal insolvency reform was identified by the Keane Report as a catalyst for addressing the mortgage arrears problem and it indicated that without an effective insolvency system the mortgage arrears problem will not be resolved. The introduction of the new Personal Insolvency Act provides new statutory insolvency frameworks to allow debtors and creditors reach arrangements on unsustainable mortgage and personal debt. The legislation provides a legal framework for the resolution of mortgage arrears, as well as other personal debt, and it will provide certainty for borrowers and lenders alike about the consequences of non-payment and failure to reach agreement. It does not preclude, however, borrowers and lenders reaching bilateral agreements to address mortgage or other debt difficulty.

- Mortgage Arrears Resolution Strategies: As announced in March 2013, the implementation of the mortgage arrears strategies has further intensified with the Central Bank now setting time bound and measurable targets for the main banks on their progress in resolving, on a durable basis, the position of their mortgage customers who are in arrears on their mortgage. The “Keane Report” has already outlined a number of possible options that can be considered by banks to provide a sustainable solution for a mortgage in difficulty on a case by case basis.

- Comprehensive Advice and Guidance: In addition to existing arrangements, the Government has introduced a range of additional information and guidance resources to assist mortgage holders through what can be a difficult and stressful process. A dedicated website, www.keepingyourhome.ie , has been put in place to provide general public information on mortgages arrears issues. In addition, there is a Mortgage Arrears Information Helpline, which is established under the aegis of the Citizens Information Board, to provide more tailored information to individual callers. Finally, a panel of accountants has been put in place to provide “one to one” independent advice to borrowers who have been provided with a long term forbearance resolution offer by their lender in respect of a mortgage on their primary home. All of these information services are provided at no direct charge to the users of the service.

- Keeping families in their homes: As a social housing response, a “mortgage to rent” scheme is now in place on a nationwide basis. This option will be available to households with unsustainable mortgages and who would qualify for social housing support and meet other appropriate criteria and will allow the family, in the context of an agreed resolution to an unsustainable mortgage, to remain in their home.