Cian O'Callaghan (Dublin Bay North, Social Democrats)
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37. To ask the Minister for Finance the action he is taking to reduce extremely high interest rates being charged to some mortgage holders whose mortgages were sold to financial institutions after the crash; and if he will make a statement on the matter. [16239/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB).

The ECB increased official interest rates over the course of 2022 and 2023 as it moved to combat excess inflation. However, since last summer it has now reduced official interest rates on six occasions, most recently with effect from 12 March. These recent monetary policy changes, taken together with a change to its operational framework for implementing monetary policy last September, have resulted in a reduction of 1.85% in its main official lending rate to 2.65%.

The level of official interest rates will influence the overall level of interest rates throughout the economy. However, the determination and adjustment of retail and business lending rates are commercial decisions for individual creditors in line with the terms of the particular credit contract. Due to their particular contractual arrangements, most tracker mortgage borrowers will, as the ECB reductions work through the system, see their mortgage interest rate decline in line with the reduction in the main ECB lending rate.

However, in the case of other variable rate mortgages the pass through of monetary policy rate changes, either upwards or downwards, is less rigid than is the case with tracker mortgages and other commercial factors, such as the cost of wholesale and retail funds, risk appetite, operational costs, expected return, desired market segment will also be relevant. This will also be the case for fixed interest rate mortgages but, of course, the interest rate on such mortgages does not adjust until the end of the fixed rate period.

In overall terms Central Bank interest rate data indicates that, on average, retail mortgage rates have declined over the past year, but at a lower rate than the fall in official interest rates over comparable periods. In the case of new mortgages from credit institutions, the latest available data is for the end of January and so will not take account of the more recent ECB rate reductions, indicates that average mortgage rates were 45 basis points lower in annual terms.

In relation to outstanding mortgages, the latest available data is for end 2024, and it also indicates that the average interest rate on all mortgages held by both banks and 'non-banks' also declined over the course of 2024.

The Central Bank has put in place a range of measures in order to protect consumers who have or who are taking out a mortgage. The consumer protection framework applies in the same way to all regulated mortgage entities such as banks, retail credit firms and credit servicing firms. It seeks to ensure that lenders 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.

Specifically in relation to non-tracker variable rate mortgages, 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 Government is acutely aware of the impact that increased mortgage interest rates has had on borrowers over recent years, and as the Deputy is aware it has introduced a mortgage tax credit to assist borrowers who experienced an increase in interest rates.

In addition, it also expects all mortgage creditors to act in the best interests of their customers and, now that official interest rates are declining, to keep their lending rates under review.