Gerald Nash (Louth, Labour)
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135. To ask the Minister for Finance if he is concerned about the impact of rising European Central Bank interest rates on mortgage holders; his plans, if any, to put a cap on variable mortgage interest rates to protect homeowners; if he agrees that the current code of conduct on mortgage arrears needs to be updated to provide greater protection to homeowners who may be in arrears; and if he will make a statement on the matter. [46205/22]

Mick Barry (Cork North Central, Solidarity)
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149. To ask the Minister for Finance if he will support measures to be taken to ensure that interest rate rises will not be passed-on to mortgage consumers; and if he will make a statement on the matter. [46196/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 135 and 149 together.

I am aware that the European Central Bank (ECB) has in recent months increased its official interest rates. The ECB is independent in the formulation and implementation of monetary policy.

The price lenders charge for their loans is a commercial matter for individual lenders. As Minister for Finance I cannot determine the lending policies of individual banks or other lenders, including the interest rates they charge for mortgages and other loans.

While the general level of new lending interest rates in Ireland are currently higher than in many other European countries, recent trends indicate that the interest rates charged by lenders on new mortgages have been falling in Ireland. For example, in July 2022 – based on the latest available data from the Central Bank - the weighted average interest rate was 2.63%, which is down from 2.69% at the end of 2021 and 2.73% in July 2021.

Most new mortgages in Ireland are now fixed rate mortgages and the average interest rates on these mortgages, 2.50% at the end of July, is even a little bit lower. At the end of 2021 this was 2.59%.

Over the same period, the average Eurozone new mortgage interest rate has increased and, therefore, the differential between the Irish and the Eurozone mortgage interest rate has narrowed from 1.40% at end 2021 to 0.55% at end July 2022.

It should be noted that the structure of the Irish mortgage market has changed over time. For example, there has been an increase in the take up of fixed rate mortgages - in July 2022 for example, over 88% of new mortgages were at a fixed interest rate - and this will protect borrowers for an adjustment in the interest rate for the period that the interest rate is fixed.

Deputies may also wish to note that, as regulator, the Central Bank has introduced a number of increased protections for variable rate mortgage holders in recent years which help mortgage holders identify lower cost mortgage options.

Firstly it made changes to the Consumer Protection Code which required lenders to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates.

Secondly, it also increases the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.

Also, by considering and availing of the options available on the market, some borrowers may be able to reduce their mortgage costs. A 2020 Central Bank study estimated that three in every five ‘eligible’ mortgages for principal dwelling homes stand to save over €1,000 within the first year if they switch and €10,000 over the remaining mortgage term.

The change in the Irish mortgage market to a greater proportion of fixed rate mortgages along with changes to the Consumer Protection Code outlined above will help mortgage holders manage the impact of rising ECB interest rates.

In relation to the Code of Conduct on Mortgage Arrears (CCMA), the CCMA was introduced to ensure that regulated entities have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears and is part of the national policy framework of supports and protections available to assist borrowers in financial difficulties.

The CCMA sets out the process that entities must follow when a borrower is in or facing difficulties with their mortgage payments. Due regard must be given to the fact that each case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.

In addition, the Central Bank has made its expectations to lenders clear on how firms should engage with borrowers who are in long-term mortgage arrears. Lenders should seek to offer appropriate and sustainable solutions to borrowers. Nevertheless, borrowers who have not engaged with the processes laid out under the CCMA, risk loss of ownership.

That being said, there is an obligation on regulated entities to explore all of the options for alternative repayment arrangements (ARAs) offered by that entity, in order to determine which ARA, if any, is appropriate and sustainable for the borrower’s individual circumstances. Under the CCMA, a regulated entity may only commence legal proceedings for repossession where it has made every reasonable effort to agree an ARA with the borrower and other clear requirements are met, or the borrower has been classified as not co-operating.

The CCMA also provides for an appeals mechanism, including where the entity declines to offer an ARA, where the borrower is not willing to enter into an ARA offered, or where the entity classifies the borrower as not co-operating.