The countdown to politicians forcing cuts in costly mortgage rates quickened yesterday as Fianna Fáil pledged to reintroduce a bill in the Dáil that it says will swiftly pave the way for lenders to slash home loan rates.
Finance spokesman Michael McGrath told the Irish Examiner he will table legislation “within weeks” to give the Central Bank extensive powers persuading lenders to cut expensive standard variable mortgage rates.
“We will introduce legislation at the first opportunity,” said Mr McGrath.
A majority of deputies in the Dáil would now support imposing some sort of controls on mortgage interest rates because lenders are charging “excessive rates”, he said.
The legislation could be on the statute book in a relatively short period of time, said Mr McGrath.
The agreement Fianna Fáil has struck to help support a minority Fine Gael government includes a commitment to tackle high variable mortgage interest rates.
The commitment by Mr McGrath means there is likely to be swift progress over variable rates, of which Ireland has the highest in the eurozone.
The Central Bank has long said it doesn’t have the powers to apply ceilings to mortgage interest rates, and, indeed, doesn’t want such powers.
Central Bank governor Philip Lane told reporters last week that imposing a rates ceiling was “a very crude instrument which has many downsides, and is really the symptom rather than the underlying cause”.
He is worried that any controls will discourage new lenders entering the mortgage market.
Central Bank director of consumer protection Bernard Sheridan yesterday said that the bank is considering introducing a code of conduct to help borrowers switch mortgage providers more easily.
A paltry 1,340 mortgage holders switched lenders last year, according to figures from the Banking & Payments Federation of Ireland.
“A switching code in itself won’t necessarily do any good so we really want to improve transparency and really nudge people, if they so want to move, that they can move and we will be looking at whether a code is the way to go or not,” said Mr Sheridan.
Many campaigners have argued that Irish home owners are being fleeced and are charged variable rates which are the highest in the eurozone.
About half of all the 746,600 residential mortgage accounts in the Republic are on low tracker rates which are pegged to rock-bottom ECB rates. That leaves tens of thousands of householders paying relatively high standard variable rates or fixed rates.
Brendan Burgess, of the Fair Mortgage Rates Campaign, said the structure of the mortgage market here is already “highly dysfunctional” and new entrants could not expect to tap a large amount of switching deals as a result.
Any legislation to regulate standard variable mortgage rates will not be universally welcomed.
One senior market source said new entrants would likely shy away from a country where rates are set by politicians.
“Political interference would be perceived as very unhelpful,” said the source, referring to funding of Irish lenders and the potential erosion of value in the banks when the State sells its stakes.
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