Minister meets banks to discuss homeowners’ interest-rate challenge

Lenders must engage with their mortgage customers to prevent them falling into arrears as the interest rate landscape continues to shift, Minister for Finance Michael McGrath has said.

The Minister has met representatives from the main retail banks and other industry stakeholders in Dublin, including the Central Bank of Ireland, to discuss the challenges facing borrowers. He also met representatives from the Money Advice Budgeting Service (Mabs) and the Insolvency Service amid “increased demand for their services” generally.

Mr McGrath said he believed the “vast majority” of mortgage holders in the Republic are making a “genuine effort” to keep up with their monthly payments and for those who cannot, “there are supports available”.

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However, the Fianna Fáil TD said in a statement that the industry “must engage with their customers to prevent them falling into arrears” amid a “rapid change” in the interest rate environment.

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“I am acutely conscious of the impact that rising interest rates are having on mortgage borrowers,” Mr McGrath said on Thursday. “We heard at firsthand at the meeting today from Mabs and the Insolvency Service of Ireland about the real-life examples they are dealing with and the increased demand for their services generally.”

While the Minister said he supported the work of the Central Bank to help lenders find ways to support customers, he added: “It will now be necessary for the industry to demonstrate that they are delivering for borrowers in difficulty with supports and certainty, and developing long-term sustainable solutions for borrowers.”

Derville Rowland, deputy governor of the Central Bank for consumer and investor protection, said the regulator will continue to “scrutinise” lenders to make sure they are supporting borrowers who need help or wish to switch product or provider. She said banks and other lenders “must be proactive, responsive and coordinated, and that expectation was reinforced at today’s meeting”.

Highest in decade

Banking and Payments Federation of Ireland chief executive Brian Hayes, the lobby group for the sector, welcomed discussions with the Minister and said the organisation is working closely with the Department of Finance, the regulator and other stakeholders on the issues raised.

Irish mortgage rates have hit their highest level in a decade in recent weeks as retail banks and other lenders continue to pass European Central Bank (ECB) rate hikes on to customers as Frankfurt battles to get the rate of inflation across the euro zone back down to its annual 2 per cent target.

Lenders in the Republic were initially slow to pass on the uptick in interest rates internationally to mortgage customers outside those on tracker loans but have begun to catch up. Bank of Ireland in July hiked its fixed rates for the fourth time in less than a year, while AIB raised its fixed rates in June, also for the fourth time in a year.

With euro zone inflation remaining stubbornly high, it is widely anticipated that more ECB rate increases are on the table this year.