Bernard Durkan (Kildare North, Fine Gael)
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113. To ask the Minister for Finance the extent to which the interest rates charged to borrowers are in line with interest rates charged in other jurisdictions throughout the European Union; and if he will make a statement on the matter. [1814/16]

Michael Noonan (Limerick City, Fine Gael)
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Firstly, I assume that the Deputy is referring to mortgage interest rates which I will discuss below. However, for all loans I would encourage prospective borrowers to shop around for the best deal available. In this regard the Competition and Consumer Protection (CCPC) website, has very useful information for borrowers.

With regard to mortgage interest rates, I would like to confirm to the Deputy that the lending institutions in Ireland - including those in which the State has a shareholding - are independent commercial entities. I, as Minister for Finance, have no statutory role in relation to regulated financial institutions passing on the European Central Bank interest rate change or in relation to the mortgage interest rates charged.

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.

Last May, I requested a report from the Central Bank on the topic which was subsequently published. The Report on the Influences of Standard Variable Rate Mortgage Pricing is available here: . It stated that the spread between official ECB interest rates and the standard variable mortgage rate is relatively high in Ireland, both by historical standards and compared to European peers. However, three factors are important determinants of this margin, namely increased credit risk resulting from high levels of non-performing loans and lengthy and uncertain processes of collateral recovery, weak competition, and the constraints on bank profitability arising from legacy issues of the financial crisis, such as an increased regulatory requirement for capital.

Nonetheless, I have taken steps to ensure that the banks provide options for mortgage holders to reduce their monthly repayments. I met with the six main mortgage lenders in May 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 many 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. I therefore encourage borrowers to contact their bank to see what is available to them in their circumstances or 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 which I referred to earlier is a valuable source of information on the rates charged by various financial institutions. In addition, the CCPC are currently running a mortgage switching campaign and have a mortgage switching tool on their website which should allow borrowers compare rates charged across institutions.  I also note that some lenders offer repayment of legal fees or cash incentives to borrowers switching mortgage provider.

I asked the banks to provide options by which borrowers could reduce their monthly repayments and I believe options have been put in place. Furthermore, I am pleased to see that new initiatives and reductions continue to take place. As recently as last week one bank introduced a 0.5% reduction on managed variable rates for new or switcher mortgages with a loan to value of 80% or less. Another bank reduced its SVR in December. These initiatives illustrate the increasing competitive dynamics in the market.

I note that the Central Bank's statistical release of 11th December 2015 stated that mortgage interest rates generally declined during the third quarter of 2015. Variable Principal Dwelling House (PDH) rates declined by 17 basis points over the second quarter with corresponding Buy-to-Let (BTL) rates falling by 14 basis points during the same period.

The most recent statistics are available : .