Fergus O'Dowd (Louth, Fine Gael)
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183. To ask the Minister for Finance the action being taken to reduce variable interest rates in the banking sector; and if he will make a statement on the matter. [39652/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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The issue of standard variable mortgage rates is a significant one for this Government and the Programme for a Partnership Government has set out a number of important and practical measures which seek to improve the position of variable rate mortgage holders.

A key item was the request to the Competition and Consumer Protection Commission (CCPC) to conduct a review of the Irish mortgage market. The CCPC has recently produced its report and it outlines a range of short, medium and long term options to improve the operation of the market. The Government will now evaluate and consider these options in detail. A web link to the report is attached for information:

www.ccpc.ie/business/wp-content/uploads/sites/3/2017/06/CCPC-Mortgages-Options-Paper.pdf.

The Government also believes that measures to encourage and promote a greater level of switching in the mortgage market will help boost the level of competition in the market for existing mortgages. In particular, the Programme for a Partnership 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. In line with this commitment, in 2016 the Central Bank commenced research in the area of mortgage switching which was completed earlier this year. Based on this research, the Central Bank has now commenced a consultation process on proposed measures to help consumers to compare their existing mortgage to other mortgage options and to provide consumers with standardised switching information:

www.centralbank.ie/docs/default-source/publications/Consultation-Papers/cp112/cp112-enhanced-mortgage-measures---transparency-and-switching.pdf?sfvrsn=2.

The Central Bank has already made some changes to require lenders to better inform and protect variable rate mortgage holders in relation to changes in mortgage rates. These were set out in an Addendum to the Consumer Protection Code 2012 and require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an interest rate 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.

In overall terms, the Government is of the opinion that increased competition rather than administrative controls is the best way to ensure that retail lending rates are driven down in a sustainable way for the market as a whole but without giving rise to potentially undesirable consequences for the provision of new mortgage lending. There has been some progress in this area. Recently published Central Bank data showed that standard variable mortgage rates for new PDH mortgages fell by 23 basis points to 3.34 per cent in quarter 2 2017 since the same period in 2016, and the further variable rate mortgage reduction announced last week by a main mortgage lender will have a further welcome impact on overall mortgage rates. However, this is a policy area that the Government will continue to keep under active review in its ongoing engagement with mortgage lenders and in implementing the Programme for Government commitments to help deliver on a long term basis better outcomes for all mortgage borrowers.