Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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89. To ask the Minister for Finance if he will introduce a cap on mortgage interest rates to prevent mortgage holders and families being impoverished by rising interest rates; and if he will make a statement on the matter. [21568/23]

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.

It should also be noted that the weighted average interest rate on new Irish mortgage agreements at end-February 2023 was 2.92 per cent and 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 ECB interest rate increases for the period that the interest rate is fixed.

Further, a number of measures have been implemented to support households facing rising interest other than imposing caps on mortgage interest rates which has the potential for unintended consequences for current and future mortgage holders.

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.

More recently, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers.

With respect to mortgages, the Central Bank is especially focused 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.

In addition, as the Deputy is aware, the total size of Budget 2023 was €11 billion and it contained many measures to assist families with the increased cost of living. Furthermore, on 21 Feb 2023, an extra €1.2 billion was provided to help households and businesses to meet cost of living increases

However, I am aware 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.