Matt Carthy (Cavan-Monaghan, Sinn Fein)
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106. To ask the Minister for Finance the engagements he has had with the Central Bank regarding residential mortgage holders who were overcharged as a result of the tracker mortgage scandal and have had their mortgage contracts sold to third parties; and if he will make a statement on the matter. [3096/23]

Michael McGrath (Cork South Central, Fianna Fail)
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Changes in the interest rate on a tracker mortgage are determined by any movement in the underlying rate being tracked, and in line with the terms and conditions of the mortgage contract, these changes are applied to tracker mortgages customers by their lenders. This approach applies to all tracker mortgage customers including those that have remained with the original lender that their tracker was drawn down with and customers whose tracker mortgages have been sold to a third party.

Where a loan is sold or transferred to another regulated entity, the protections that were available to borrowers prior to the transaction continue to be in place with the new owner. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with Irish financial services law that applies to ‘regulated financial service providers’.

This ensures that consumers whose loans are sold or transferred, maintain the same regulatory protections, including under the various Central Bank statutory Codes of Conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013.

The Central Bank also advises that the protection of mortgage loan borrowers, including those in arrears, is a key priority and that it will continue to supervise compliance by regulated entities with the CCMA and will investigate any issues that arise, including patterns of behaviour which suggest that the CCMA process is not being followed.

I would also add that the Central Bank does keep its consumer protection framework under review and, as the Deputy will be aware, the Central Bank is currently undertaking a process to review its Consumer Protection Code and a discussion paper on this is now open for public consultation.

In relation to the tracker mortgage examination, the Central Bank's final report of the supervisory phase of the examination was published in July 2019. It outlined that over 40,000 customer accounts were impacted by lender failings and that almost €700 million of redress and compensation was paid to impacted borrowers. The Central Bank has also concluded enforcement actions and imposed fines on lenders for their tracker related failures which were BOI €100.5m; AIB/EBS €96.7m; Ulster Bank €37.8m; PTSB/Springboard €25.5m; KBC €18.3m.

The Central Bank has also informed me that it will now monitor developments in the Financial Services and Pensions Ombudsman (FSPO) and the courts in relation to the tracker issue to see if any further action is required by it arising from decisions which may be made in those for fora.

Gerald Nash (Louth, Labour)
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107. To ask the Minister for Finance if he is concerned about the impact on households of the increased costs of servicing mortgages on homes as a result of rising interest rates; if he is considering any policy interventions to assist mortgage-holders; and if he will make a statement on the matter. [3087/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The formulation and implementation of monetary policy is an independent matter for the European Central Bank. The interest rate on the ECB’s main refinancing operations, which provides the bulk of liquidity to the banking system, is currently at 2.5%, an increase of 250 basis points since last summer.

In December 2022, the ECB Governing Council indicated that interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive to ensure a timely return of inflation to the 2% medium-term target.

Any decision to change official interest rates – and the timing of any such decision – is solely a matter for the ECB. In addition any decisions taken by mortgage lenders in relation to passing on interest rate increases are a matter for those lenders which are run on an independent commercial basis. Neither the Central Bank nor I as Minister for Finance have any function or role in such decision making matters by credit institutions.

However, there is a comprehensive consumer protection framework in place related to mortgages and mortgage lending in Ireland that has been introduced and enhanced in recent years. For example, the Central Bank Code of Conduct on Mortgage Arrears (CCMA), seeks to ensure that Central Bank regulated entities are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle, for example, through protections at the initial marketing/advertising stage, in assessing the affordability and suitability of the mortgage and at a time when borrowers may find themselves in financial difficulties.

In addition, the Central Bank introduced a number of increased protections for variable rate mortgage holders in February 2017. The enhanced measures, which are provided for in an Addendum to the Consumer Protection Code 2012 (the Code) require lenders to explain to borrowers how their variable interest rates have been set, including in the event of an increase.

The measures also improve the level of information required to be provided to borrowers on variable rates annually about other mortgage products available from their lender which could provide savings for the borrower. The lender must also signpost the borrower to the CCPC’s mortgage switching tool.

An important example is the requirements put in place by the Central Bank complement the European legislative framework, including the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 which requires, for example, to include the interest rate in pre-contractual information provided to consumers.

These are important regulatory provisions and I believe will be of benefit to mortgage holders in the current interest rate environment.

In relation to policy interventions to assist mortgage-holders, Mortgage Interest Relief (MIR) was phased out on a gradual basis over the period 2009 to 2020. The decision to abolish MIR was taken in the wake of the financial crisis with the cost of the relief being one of the influencing factors. MIR cost over €700 million in 2008. It should be noted that prior to its curtailment and eventual abolition, in 2005, the top two income deciles accounted to close to half of the tax forgone through the measure.

However, is also worth noting that the total size of Budget 2023 was €11 billion, and it contained many measures to assist families with the increased cost of living including:

- a €12 increase in weekly social welfare rates for pensioners and people of working age;

- an increase of €40 in the Working Family Payment threshold;

- increased eligibility for the fuel allowance;

- the abolition of inpatient hospital charges;

- the provision of GP visit cards to those on or below the median income;

- the introduction of a free books scheme for primary school pupils;

- an income tax package of €1.1 billion that included a number of measures such as an increase in the standard rate cut off point, an increase in the main tax credits and the introduction of a rental tax credit.

This substantial cost of living package which included a large range of one-off measures will assist households with cost of living pressures.