Bernard Durkan (Kildare North, Fine Gael)
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106. To ask the Minister for Finance the extent to which variable mortgage interest rate charges can be brought into line with those applicable in adjoining jurisdictions, eurozone and otherwise; and if he will make a statement on the matter. [17770/16]

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy will be aware, the issue of variable rates in Ireland is a matter which I have been concerned about for some time. Last year I requested a report on the issue from the Central Bank. The Report entitled, 'Influences on Standard Variable Mortgage Pricing in Ireland' was subsequently published on the Department's website and is available here: .

This research identified three main reasons for higher rates in Ireland. First, the pricing of loans needs to reflect credit risks. In Ireland these risks are elevated due to high levels of non-performing loans and the lengthy and uncertain process around collateral recovery. Second, competition is weak. This is not unrelated to credit risks since high credit risk deters new players from entering the market. Third, bank profitability is still constrained by legacy issues. Profitability is essential to ensure banks build up adequate capital buffers to meet increasing regulatory requirements and to withstand future adverse shocks.

I also met with the main mortgage lenders in May last year and outlined my view that the standard variable rate being charged to existing and new Irish mortgage customers was too high.  The banks agreed to review their rates and products and to have simple options to reduce monthly mortgage payments for standard variable rate customers. In September 2015 I concluded a series of follow up meetings with these banks and I think that it is fair to say that there have been considerable movements in the mortgage offerings of the Irish banks in the last twelve months.  Furthermore, the fact that some of these offers have been announced recently is a vivid illustration of the effectiveness of the Government's policy, that competition is the best way to put pressure on the banks to reduce rates.

In this regard, I am pleased to note that a Central Bank statistical release of 10 June 2016 showed that Principal Dwelling House (PDH) mortgage rates fell across all instrument categories over the 12 month period ending in the first quarter of 2016. The most pronounced fall was observed for standard variable rate mortgages which declined by 49 basis points to 3.64 per cent over the year ending Q1-2016. Fixed rate PDH mortgage rates also declined, with rates fixed for 1-3 years falling by 34 basis points over the same period.