Eoin Hayes (Dublin Bay South, Social Democrats)
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572. To ask the Minister for Finance the steps he is taking to bring down the costs of mortgage interest rates for homeowners and first-time buyers in the Irish market; and if he will make a statement on the matter. [19086/25]

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 the ECB has reduced official interest rates on seven occasions, with the most recent reduction taking effect on 23 April. These monetary policy changes, taken together with a change to its operational framework for implementing monetary policy last September, have resulted in a reduction of 2.10% in its main official lending rate to 2.40%.

The level of official interest rates will influence the overall level of interest rates throughout the economy. However, the determination and adjustment of retail lending rates are, in line with the terms of the particular credit contract, commercial decisions for individual creditors. Due to their particular contractual arrangements, most tracker mortgage borrowers will 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. 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 the interest rate on existing fixed rate mortgages will 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 February 2024 (and so will not take account of the more recent ECB rate reductions) and this indicates that average mortgage rates were 50 basis points lower in annual terms.

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.

In addition, mortgage creditors are required to issue an annual notification to variable rate mortgage holders and at fixed rate maturity for fixed rate holders, which among other items shows a summary of alternative mortgage products available from that provider. Recognising the role switching can play in an effectively functioning mortgage market, under the revised Consumer Protection Code, which will come into force in March 2026, mortgage lenders will also be required to include within these notifications a personalised euro savings estimate alongside each alternative mortgage refinancing option presented. Lenders will be required to provide a specific reminder to customers concerning mortgage refinancing options, issued between four and eight weeks from the first notification.

The Government is acutely aware of the impact that increased mortgage interest rates has had on borrowers over recent years, and in response it introduced a mortgage tax credit to assist borrowers who experienced an increase in interest rates. In addition, now that official interest rates are declining, it expects mortgage creditors to keep their lending rates under review and to ensure that, in their policies and decision making processes, they take account of the interests of their customers.