Bernard Durkan (Kildare North, Fine Gael)
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80. To ask the Minister for Finance the extent to which mortgage lending rates are likely to converge with the rates applicable in other European jurisdictions; and if he will make a statement on the matter. [40899/15]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, I have acknowledged that high mortgage repayments cause difficulties to families and I invited the Governor of the Central Bank to meet me in April to discuss the issue. Following this meeting, a report by the Central Bank on the factors influencing standard variable mortgage rates in Ireland was submitted to my Department and published shortly thereafter. The report found that the current interest rates in Ireland are determined by a large number of factors including nationally specific features such as increased credit risk resulting from high levels of non-performing loans and lengthy and uncertain processes of collateral recovery, limited competition, and the constraints on bank profitability arising from legacy issues of the financial crisis, such as an increased regulatory requirement for capital.

The Central Bank data in the report show that the average interest rate on outstanding loans in Ireland was close to the median across a sample of twelve euro area countries. However, this largely reflects the composition of interest rate types in the Irish mortgage market where low interest rate tracker mortgages represent a large proportion of outstanding loans bringing down the average.

The most recent data covering rates at end September 2015 was published in a Statistical Release by the Central Bank on 13 November. They show that the rate for new floating rate loan agreements for house purchase in Ireland was 3.24% and the equivalent euro rate was 2.07%. 

I held meetings with senior management of the six principal mortgage lenders in May and September to discuss the issue and the banks were asked to review their rates and to provide options by which mortgage holders might be able to reduce their repayments. Over recent months, the main lenders have announced a number of new products and initiatives that have reduced the cost of borrowing. While nationally specific features may inhibit full convergence with European rates, a more competitive mortgage provision market will create greater consumer-focused dynamics around pricing and other terms of credit.