Sorca Clarke (Longford-Westmeath, Sinn Fein)
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237. To ask the Minister for Finance the measures his Department will take to support struggling mortgage holders, considering the ECB increased its interest rates again on 4 May 2023; and if he will make a statement on the matter. [21871/23]

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 influences the overall level of interest rates throughout the economy. However, the setting of retail lending rates by individual lenders is a commercial matter for that lender and I have no function or role in such decision making matters by financial institutions.

In line with the changing interest rate environment and other relevant factors, individual lenders are considering and adjusting their new lending rates. Nevertheless, it is worth noting that, on an overall level, the increase in weighted average interest rate on new Irish mortgage agreements has not been as large as it has been in some other countries. At end-February 2023 the average rate on new mortgages was 2.92% and it is now among the lowest in the euro area.

Also it should be noted that the structure of the Irish mortgage market is changing and that there is an increase in the take up of fixed rate mortgages - in February 2023 for example 93% of new mortgages were at a fixed interest rate - and this protects borrowers from interest rate changes for the period that the interest rate is fixed.

As regulator, last November the Central Bank wrote to to all regulated firms to set its expectations on how firms should support their customers in the face of current cost of living challenges. With respect to mortgages, the Bank indicated that it is especially focused at this time on ensuring that firms:

• have the resources and arrangements in place to assess applications from existing and new or switching borrowers in a manner that is timely and based on prudent lending standards applied consistently across all applicants;

• have fit-for-purpose arrangements in place to anticipate and deal with customers in or facing arrears; and

• proactively assess the risks and consumer impact that commercial decisions, including rising interest rates, may pose to borrowers and have an action plan in place to mitigate such risks.

Last month the Central Bank published a note on the ongoing work to ensure regulated firms meet the expectations on protecting consumers in a changing economic landscape, relating to mortgages secured on a borrower’s primary residence.

The Central Bank has indicated that firms have responded with additional supports for borrowers and increased operational capacity. This has included proactive contact with vulnerable borrowers including those at greatest risk of default, and continued provision of supports, including alternative repayment arrangements, to borrowers at risk of arrears.

The Central Bank will continue to engage with firms on areas where consumers can be better supported at this difficult time.

There are also a number of important consumer protections for variable rate mortgage holders to highlight. Firstly the Consumer Protection Code requires 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.

However, it is the case that some borrowers will experience repayment difficulty on a mortgage secured on a primary residence and the Code of Conduct on Mortgage Arrears (CCMA) was introduced to ensure that regulated entities have fair and transparent processes in place for dealing with such cases.

The CCMA sets out the process that entities must follow when a borrower is in or facing difficulties with their mortgage payments and it states that all arrears 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.

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.

I would also encourage borrowers to engage with their lender to discuss any difficulty that may be arising in relation to a mortgage. Early and on-going engagement has been shown to yield positive results for both borrowers and lenders in addressing a repayment difficulty.

Finally, as the Deputy is aware, the Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation, with a particular focus on protecting the most vulnerable.

Overall, €12 billion in direct relief has been made available to counter the effects of inflation, with the policy response designed to avoid generating second round effects that could lead to an inflationary spiral.