Thomas Byrne (Meath East, Fianna Fail)
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39. To ask the Minister for Finance his plans to deal with the problem of variable mortgage interest rates; and if he will make a statement on the matter. [34055/16]

Michael Noonan (Limerick City, Fine Gael)
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The issue of standard variable mortgage rates is a significant one for this Government and it has made it clear that it is not acceptable for lenders to charge excessive rates on such mortgages.  The Programme for a Partnership Government, therefore, set out a number of practical measures which can be taken to improve the position of variable rate mortgage holders.

Firstly, it wishes to promote competition in the supply of mortgage finance.  To that end, the Government has asked the Competition and Consumer Protection Commission to work with the Central Bank to set out options for Government in terms of market structure, legislation and regulation to lower the cost of secured mortgage lending and to improve the degree of competition and consumer protection. The transposition of the Mortgage Credit Directive, which is intended to develop a more pan European mortgage market consistent with a high level of consumer protection, into Irish law earlier this year should also support this process over the medium term.  

Secondly, the Government considers that measures to encourage and promote a greater level of switching in the mortgage market would also help boost the level of competition in the market for existing mortgages.  In particular, the Programme for Government considers that the development of a code of conduct for switching mortgage provider would be a useful and practical initiative which would have the potential to deliver savings to many existing mortgage holders.  As the Deputy will be aware, research carried out by the Central Bank last year indicated that a significant number of borrowers could make savings by switching mortgages.  In order to promote the option of switching mortgages, I have asked the Central Bank to consider and formulate a code in this area.

It should be recognised, however, that the residential mortgage market now has a certain diversity and that, in addition to the standard variable rate mortgage product, a range of different mortgage products are now also available to consumer borrowers including fixed rate mortgages, loan to value managed variable rate products, trackers and restructured mortgages of various types.  Also, there is now evidence to suggest that competitive pressures are having some impact in the market with lenders bringing forward new mortgage offerings and rates.  In overall terms, recent Central Bank data indicates that the standard variable rate on new lending for primary home mortgages stood at 3.6% in the second quarter of 2016, down from 4.13% in the same period in 2015. 

The Government is of the opinion that real competition among lenders is the best way to ensure that retail lending rates are reduced in a sustainable way for the market as a whole but without giving rise to potentially undesirable consequences for new mortgage lending.  However, this is a policy area that the Government will keep under active review in its ongoing engagement with mortgage lenders and in implementing the Programme for Government.