Holly Cairns (Cork South West, Social Democrats)
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242. To ask the Minister for Finance the steps he is taking in response to rising mortgage repayments on family homes as a result of the ECB increasing interest rates; and if he will make a statement on the matter. [24795/23]

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.

The weighted average interest rate on new Irish mortgage agreements at end-March 2023 was 3.54 per cent and, while it has recently increased, it is still 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 has been an increase in the take up of fixed rate mortgages over recent years - in March 2023 for example 89% 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.

A number of measures have been implemented to support households facing rising interest rates. In terms of regulation, 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 increased 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.

I have also met with the CEOs of the retail banks and with a number of non-bank lenders where I emphasised that they should take a consumer focused approach to encourage switching where possible.

In addition, on behalf of my Department the Economic and Social Research Institute (ESRI) is currently carrying out work which will inform the development of tools to promote switching. However the ESRI’s work also serves to highlight consumer inertia as a critical issue which deserves further attention. The Competition and Consumer Protection Commission (CCPC) and Money Advice and Budgeting Service (MABS) also play an important role in informing consumers about the options available to them.

The Central Bank is scrutinising the switching and lending activity of the retail banks to ensure there is no discrimination based on who a borrower's current creditor is and it has confirmed that the work identified no evidence to date of such discrimination.

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.