Catherine Murphy (Kildare North, Social Democrats)
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225. To ask the Minister for Finance the progress he has made to date with banks in Ireland in relation to a significant reduction of interest rates on residential mortgages in view of the fact that they are some of the highest in the Eurozone; and if he will make a statement on the matter. [9772/23]

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 (ECB). As the Deputy is aware, the ECB has increased official interest rates over recent months as it attempts to combat inflation. The level of official interest rates will influence the overall level of interest rates throughout the economy. However, in a market economy the determination and adjustment of retail and business lending rates are commercial decisions for individual lenders in line with the terms of the particular credit contract and I have no function or role in such decision making matters by financial institutions.

Nevertheless, it is worth noting that the weighted average interest rate on new Irish mortgage agreements at end-December 2022 was 2.69 per cent (this was unchanged when compared to December 2021) and this compares to the equivalent euro area average of 2.95 per cent (this was 1.29 per cent at the end of 2021). The rate on new Irish mortgage agreements has now been less than the euro area average since October 2022 and is now among the lowest in the euro area.

Furthermore, the weighted average interest rate on new fixed rate mortgage agreements in December 2022, which constitute the majority (93%) of total new mortgage agreements, was 2.61 per cent. However, weighted average interest rate on outstanding Irish mortgages was 2.88 percent at end-December 2022, which was 43 basis points higher than December 2021 and was also higher that the equivalent euro area average of 1.89 per cent.

The Central Bank also 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, require regulated entities 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.

I would also like to add that there is a comprehensive consumer protection framework in place for mortgages. For example, the Central Bank Consumer Protection Code and Code of Conduct on Mortgage Arrears 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.