It has raised concerns over the fact that variable rates here are among the highest in the eurozone.
The home-loan lending market in this country was highly concentrated, the Competition and Consumer Protection Commission said in a new report.
Just three banks have an 80pc share of mortgage lending, the commission states, quoting Central Bank research.
Although they are not named, this is understood to be a reference to AIB, Bank of Ireland and Ulster Bank.
High levels of concentration may lead to “tacit co-ordination” which operates as an impediment to competition, the commission said in a consultation paper on the structure of the mortgage market. This may lead to new entrants being reluctant to set up and challenge the existing players.
“A market with a high level of concentration may lead to direct or tacit co-ordination. Even where there is little likelihood of co-ordination, such a market structure can, in itself, result in a significant impediment to competition,” the commission said.
Variable mortgage rates here are far higher than in the rest of the eurozone, with commentators putting this down to the weak level of competition in the market. This situation has led to a bill being considered by an Oireachtas committee to give powers to the Central Bank to cap interest rates charged on home loans.
The bill, proposed by Fianna Fáil’s finance spokesman Michael McGrath, is expected to become law by the summer.
The commission said it had been shown that the margins on new mortgage lending – the difference between what banks pay for deposits and what they charge for new mortgages – was “higher in Ireland when compared with elsewhere in Europe”.
The commission also raises the issue of the failure of new lenders to enter this market.
High levels of arrears among existing homeowners and those with buy-to-let mortgages, and the difficulties banks have repossessing homes when a mortgage holder is in default, are listed as likely reasons for the reluctance of new lenders to come to Ireland, according to the ‘The Irish Mortgage Market’ publication.
The commission has called for submissions from the public on the mortgage market, on foot of commitments in the ‘Programme for Government’ deal between the Government and Fianna Fáil.