Michael Creed (Cork North West, Fine Gael)
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278. To ask the Minister for Finance his views on the lack of competition in the Irish mortgage market; his plans to bring variable rate mortgages in line with the eurozone average; the estimated cost to mortgage holders on an annual basis, and the differential between Irish rates and average eurozone rates; and if he will make a statement on the matter. [13241/15]

Michael Noonan (Limerick City, Fine Gael)
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Firstly, 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. I have no statutory role in relation to regulated financial institutions passing on the European Central Bank interest rate change or to the mortgage interest rates charged. It is a commercial matter for each institution concerned. It is not appropriate for me, as Minister for Finance, to comment on or become involved in the detailed mortgage position of mortgage holders.

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 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 and the requirement to be notified of penalty or surcharge interest imposed in respect of arrears.

As I stated in previous Parliamentary Questions, a previous Deputy Governor indicated 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.

The Deputy should be aware that the Governor of the Central Bank, Patrick Honohan, in his opening statement to the Oireachtas Joint Committee on Finance, Public Expenditure and Reform last November stated that, as in most advanced economies, including Ireland, it has long been understood that tight administrative control over the rates charged by banks would be counterproductive in ensuring a sufficient flow of properly priced credit on a lasting basis. Such control would strongly discourage new entrants. In this regard, ongoing competition in the banking sector will be crucial in ensuring that the economy is provided with efficient and cost effective banking services. In this regard, there has been some movements on mortgage interest rates of late by a number of institutions which suggest that the market may well be entering a new and more competitive phase.

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.

The Central Bank of Ireland has introduced a quarterly series on new mortgage loan drawdowns. This new series contains data for interest rates on new loan drawdowns as of December 2014 (i.e. renegotiations are not included) and notes a standard variable rate of 4.2% which is close to the SVR rates quoted by the main banks.  Further details of the quarterly series is available on the Central Bank's website  .