Peadar Tóibín (Meath West, Sinn Fein)
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19. To ask the Minister for Finance if he will legislate to allow the Central Bank of Ireland to cap interest rates charged by banks on mortgages, particularly standard variable rate mortgages; and if he will make a statement on the matter. [1334/16]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, I have taken steps to ensure that banks provide options for mortgage holders to reduce their repayments.  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 the financial institutions and the reality is that the main banks have put options in place to allow borrowers reduce their repayments. Obviously, it is a matter for each individual borrower to decide what suits their circumstances but I encour age borrowers to contact their bank to see what is available to them or consider moving to another bank, where possible, if the offer is not satisfactory. I asked the banks to provide options by which borrowers could reduce their monthly repayments and I believe options have been put in place. It is up to the individual banks themselves to advertise their rates and products but as I am sure you are aware, some banks have focussed on fixed rate offerings or rates based on loan-to-value, while others have reduced their variable rates. 

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.

There has been discussion in the public domain over the last number of months regarding whether the regulation of interest rates would lead to a reduction in mortgage costs for borrowers. I believe that competition rather than regulation represents the best long term solution to this issue and Central Bank and ESRI research supports this position.

In this regard, the previous Governor of the Central Bank, Professor Patrick Honohan, indicated his opposition to the administrative control of interest rates. While he acknowledged that a reduction in bank interest rates would benefit the economy at large, it was his firm belief that the introduction of administrative control on interest rates in Ireland would be bad for the country as a whole in the medium term  including its negative effect on the entry of other banks to the market.

You will 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.