Róisín Shortall (Dublin North West, Social Democrats)
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101. To ask the Minister for Finance if he will use his leverage as a major shareholder to encourage banks to pass on interest rate cuts to persons on variable rate mortgages; the reason he has not used this leverage to date; and if he will make a statement on the matter. [5307/16]

Michael Noonan (Limerick City, Fine Gael)
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Notwithstanding the fact that the State is a shareholder in a number of banks, I must ensure that these banks are run on a commercial and independent basis to ensure the value of the banks as an asset to the State. Decisions taken by the banks are a matter for the board and management of the relevant institution. The Relationship Framework Agreements define the 'arm's length' nature of the relationship between the State and the banks in which the State has an investment.

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 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.