Dara Calleary (Mayo, Fianna Fail)
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6. To ask the Minister for Finance his views on concerns expressed by the head of the Fiscal Advisory Council that standard variable rate mortgage customers are very vulnerable to increases in interest rates at a time when the ECB is reducing rates; and if he will make a statement on the matter. [16176/14]

Michael Noonan (Limerick City, Fine Gael)
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At the outset, I must confirm to the Deputy that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and, as such, it is a commercial decision for each lender to decide what interest rates they charge customers in relation to standard variable mortgages.

Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability.  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 arrangements.

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.

As I stated in a previous Parliamentary Question today, the Deputy Governor mentioned that, within its existing powers, and through the use of persuasion, the Central Bank would continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds and this is a course of action I expect the Central Bank to continually appraise.

I appreciate that an increase in interest rates which leads to higher the standard variable mortgage interest rates would have a negative impact on the mortgage consumers but on the positive side there would be an increase on deposit rates for consumers also.

At the European Central Bank's press conference on 3 April 2014, President of the ECB, Mr Mario Draghi confirmed that key ECB interest rates would remain unchanged at 0.25%. The ECB stated that incoming information confirms that the moderate recovery of the euro area economy is proceeding in line with its precious assessment. However, the ECB also expects that there will be a prolonged period of low inflation. The ECB is committed to doing anything that will keep this period of low inflation from dragging on too long. Therefore key ECB interest rates are expected to remain low for some time yet.