Mattie McGrath (Tipperary South, Independent)
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297. To ask the Minister for Finance the reason the reduction in interest rates from the European Central Bank have not been passed on to mortgage holders; and if he will make a statement on the matter. [9204/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Government recognises the difficulties that the increase in interest rates in recent years has caused for some mortgage borrowers.

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 the course of 2022 and 2023 as it attempted to combat inflation. More recently, however, it has now reduced official interest rates and it also made a change to its monetary policy implementation framework and, taken together, these changes have resulted in a reduction of 1.6% in its main official lending rate.

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.

Due to their particular contractual arrangements, most tracker mortgage borrowers will now see their interest rate fall in line with the reduction in the main ECB lending rate. However, the pass through rate of ECB changes is less rigid in the case of other variable rate mortgages. In this regard the transmission of monetary policy rate changes happens with long and variable lags; the Central Bank has noted that this was true as rates were rising and it also observes this to be the case also as ECB policy rates move lower.

Nevertheless, the most recent Central Bank data indicates that the average interest rate on outstanding mortgages held by bank and ‘non-bank’ regulated entities has declined over the past year. This is welcome and, from a general perspective, now that the ECB is reducing official interest rates the Government expects all mortgage creditors to keep their lending rates under review and where mortgage rates had in the past increased in line with ECB increases they should now, in this new interest rate environment, also appropriately adjust downwards.

Also, from a regulatory perspective the Central Bank has put in place a range of measures in order to protect consumers. This framework seeks to ensure that 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.

This consumer protection framework provides the same protections for borrowers regardless of the regulated entity with whom they are dealing, be that a bank, retail credit firm or credit servicing firm. Specifically in relation to variable rate mortgage holders, the Central Bank's Consumer Protection Code requires all regulated mortgage creditors 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.

The Central Bank has engaged intensively with regulated firms on the operation of specific aspects of the consumer protection framework. Arising from this engagement, the Central Bank has indicated that regulated firms:

• have enhanced the supports available to borrowers in or facing arrears;

• have sufficient operational capacity in place to manage applications by borrowers to switch their mortgage or mortgage provider, and that there is no discrimination against borrowers based on where they currently hold their mortgage; and

• that changes in mortgage interest rates are in line with mortgage terms and conditions, the published variable rate policy statements of the relevant firms and the regulatory framework for which the Central Bank is responsible.

Finally any person who is experiencing a repayment difficulty on their mortgage should contact their mortgage creditor to discuss the matter or also avail of the 'Abhaile' advice and assistance service available through MABS.