Bernard Durkan (Kildare North, Fine Gael)
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248. To ask the Minister for Finance if he expects mortgage interest rates here to align with the rates applicable in other EU states; and if he will make a statement on the matter. [41559/16]

Bernard Durkan (Kildare North, Fine Gael)
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349. To ask the Minister for Finance when home loan borrowers here might be able to avail of interest rates comparable throughout the European Union; and if he will make a statement on the matter. [1971/17]

Michael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 248 and 349 together.

While Ireland is in a monetary union with other Euro area Member States, it has to be acknowledged that there are many factors, such as differences in national legal and housing systems, cultural preferences, language, the proximity of lenders to borrowers, which will continue to inhibit the full integration of the residential mortgage market and of mortgage interest rates in the Euro area and the wider EU.  More directly, differences in the nature of mortgage and other credit markets, credit and market conditions, mortgage default rates and the funding of mortgage credit will also impact on the levels of mortgage lending rates between and within different countries.  However, there have been some developments which seek to promote a more harmonised market for credit across the EU.  In particular, the 2014 Mortgage Credit Directive, which has now been transposed into Irish law by the European Union (Consumer Mortgage Credit Agreements) Regulations 2016, seeks to develop a more harmonised, efficient and competitive internal market for the provision of residential mortgages to consumer borrowers and this should help to promote the closer integration of EU mortgage markets over time.  

At a national level, however, the Government accepts that further action is required to drive down mortgage interest rates in Ireland and the Programme for a Partnership Government has set out a number of practical measures which seeks to improve the position of mortgage borrowers and variable rate mortgage holders in particular. For example, it 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.  Also the Government considers that measures to encourage and promote a greater level of switching in the mortgage market would 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.  Therefore, in order to promote the option of switching mortgages, I have also asked the Central Bank to consider and formulate a code in this area and in response the Central Bank has indicated that it has commenced a programme of research on this topic to inform its consideration of this matter.

More immediately, it should be noted that the Central Bank is introducing some further protections for variable rate mortgage holders. The enhanced measures, which are provided for in an , and effective from 1 February, will require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase. The measures will also improve the level of information to be provided to borrowers about other mortgage products their lender provides that could provide savings for the borrower and signpost borrowers to the CCPC's mortgage switching tool.

It is important also to take account of the diversity of the residential mortgage market which comprises, inter alia, fixed interest rate, loan to value managed variable rate mortgages, trackers, restructured mortgages of various types, etc.  Therefore, the residential mortgage market cannot be assessed by only looking at standard variable rate mortgages, and any assessment would need to consider the large number of different factors that influence interest rate pricing.

Overall, the Government is of the opinion that real competition among lenders is the best way to ensure that retail mortgage lending rates are further reduced in a sustainable way for the market as a whole but without giving rise to potentially undesirable consequences for new mortgage lending.  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.