A survey by the Irish Financial Services Regulatory Authority (IFSRA) indicates that mortgage loans advanced by Irish-based credit institutions are good value when compared to others in the euro area.
The report also shows there is no evidence to suggest Irish mortgage lenders pass on increases in interest rates faster than decreases.
IFSRA carried out its Interest Rate Study amid concerns that consumers were getting a raw deal. The study, which covers the period from January 1998 to June 2003, was undertaken to examine how 16 credit institutions passed on changes in interest rates to consumers.
IFSRA consumer director Ms Mary O'Dea said the organisation conducted the study because concerns had been expressed publicly that interest rate reductions were not being passed on to mortgage holders.
"However, we also believed that other non-mortgage products needed to be examined because interest rates have a huge impact on the costs of these financial products," she said.
"We aim to foster competition by adding transparency to the market and highlighting the interest rates charged and paid on retail products by institutions."
Ms O'Dea said IFSRA was issuing a fact sheet to help consumers understand what interest rates are, to outline the factors that affect interest rates and give tips on how to get the best value.
"The study also shows that there is a wide range of rates charged on variable rate products," she said.
"To help people to choose the products that represent the best value for them we will be publishing a cost survey on personal loans and lending products in September of this year."
The main findings of the study were:
- In general, the Irish variable mortgage market offers good value to consumers when compared to prices available in the euro area.
- Average spreads observed by lenders appear to have drifted upwards in recent years.
- There is no evidence to suggest that in the variable rate mortgage market interest rate increases are passed on more quickly than interest rate decreases.
- In respect of non-mortgage lending products, there was a widening of spreads in the period late 1998 to early 1999 and again since May 2001, as reductions in interest rates were not passed on in full to consumers.
- With the exception of the mortgage market and to some extent deposits, retail interest rates seem largely unresponsive to changes in official interest rates.
PA