Tommy Broughan (Dublin North East, Independent)
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210. To ask the Minister for Finance if he will report to Dáil Éireann on the Central Bank of Ireland's report in July 2015; if the report confirms the fears of standard variable mortgage holders that their mortgage agreements are being burdened with additional interest to subsidise the cost to banks of new mortgage and loan business; and if he will make a statement on the matter. [43036/15]

Michael Noonan (Limerick City, Fine Gael)
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Firstly, I need to acknowledge that it is not clear from the question which Central Bank report is being referred to. The Central Bank published two Economic Letters in July 2015; 'Switch and Save in the Irish Mortgage Market' and 'Mortgage Interest Rate Types in Ireland'. These reports are available on the bank's website at the following links:

and . The report on switching examined how many borrowers could save by switching provider, the costs involved in switching, the numbers switching and initiatives that would benefit borrowers, including increased information and greater transparency on mortgage products. The report on mortgage interest rate types looked at the number of borrowers on different interest rate types, the propensity of contracts to change rate type over time and the level of instalments for different mortgage contract types. 

These reports do not directly relate to the issues raised by the Deputy in his question.  Nonetheless, as the Deputy will be aware, I have taken steps to ensure that the banks provide options for mortgage holders to reduce their monthly repayments. Last May, I requested a report from the Central Bank on the topic which was subsequently published on my Department's website and on the Central Bank's website. This report was entitled 'Influences on Standard Variable Rate Pricing in Ireland' and is available here: .

This report found that the spread between official ECB rates and the standard variable rate is relatively high and that new lending rates are above average compared to European peers. However, they noted that the pricing of loans reflects three main factorscredit risk, competition and bank profitability. Credit Risk is influenced by the high level of non-performing loans and the lengthy and uncertain process of collateral recovery; Competition is weak and this is not unrelated to the credit risk as new entrants may be deterred from entering the Irish market; Bank profitability is constrained by legacy issues. Profitability is needed to build capital buffers and to meet increasing regulatory requirements.

It should also be noted that the interest rate charged by banks 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.

Last May I met with the six main mortgage lenders and outlined my view that the standard variable rate being charged to Irish customers was too high. The banks agreed to review their rates and products and, by the beginning of July, to have simple options to reduce monthly mortgage payments for SVR customers.

In September I concluded a series of follow up meetings with these banks and the reality is that the majority have put options in place to allow borrowers reduce their repayments. These options range from lower variable rates to new suites of variable rates based on loan to value and reductions in fixed rates.

While it is a matter for each individual borrower to decide what suits their circumstances, I encourage both new and existing borrowers to see what is available to them in their circumstances or, for existing customers, to consider moving to another bank, where possible, if the offer is not satisfactory. In this regard, the Competition and Consumer Protection Commission (CCPC) website www.consumerhelp.ie is a valuable source of information on the rates charged by various financial institutions.

You may also be aware that on 12 November the Central Bank published a consultation paper on proposed increased protections for variable rate mortgage customers. This is called Consultation Paper CP98 and is available on their website. The suggested measures fall under three broad categories:

- Lenders would be required to publish a summary statement of the factors that impact on their variable rate and the criteria and procedures that apply to setting such rates;

- On an annual basis lenders would be required to notify variable borrowers of alternative mortgage options.  They would also have to notify borrowers of these options when increasing SVR rates and provide borrowers with a link to the Competition and Consumer Protection (CCPC) website to assist borrowers who wish to switch;

- The Central Bank is consulting on increasing the notification period for variable rate increases (it is currently 30 days) and they are also consulting on a proposal to require the lender to state the reason for changing the rate.

The closing date for submissions to the public consultation is 12 February 2016. 

This initiative should increase transparency around the factors which influence a banks' standard variable rate pricing.