Joan Burton: Cabinet may act to lower mortgage rates

Tánaiste Joan Burton has warned banks who refused to lower variable mortgage rates that they will be targeted by Government in the next budget.

“I’ve been listening to some of the testimony by the bankers and others [at the banking inquiry], and loss of memory and slight amnesia seems to be a feature,” said the Labour leader.

“Have they quite forgotten the level of support that was given to them by people in Ireland in terms of the bailout?

“They would be extremely wise to consider their corporate responsibility in relation to people on variable rate mortgages.

“If the banks simply can’t recognise they have some obligation to people in Ireland in the context of the bailout that they’ve enjoyed, there are other avenues to address this.”

However, the governor of the Central Bank has contradicted Government claims that it can force banks to cut variable interest rates, saying he knew of “no successful economy” that tries to enforce such regulations.

Patrick Honohan said such a move could choke off competition in a sector that needs to get the overall regime right.

Speaking at the launch of the Central Bank’s 2014 annual report, dominated by news of his impending retirement, Prof Honohan insisted that politicians imposing variable rate cuts could cause unintended problems.

Warning that such an approach could drive away potential competitors, he said: “I don’t know of any successful economy these days that attempts” to introduce such measures.

Prof Honohan accepted that the variable rates crisis was an issue, stressing that Central Bank research on the prices, competition, and characteristics of the loans and borrowers in the dispute will be published soon.

However, he said forcing banks to reduce their rates could “choke off” competition, adding that the sector did not need “somebody poking around” without looking at the overall picture.

He further noted that the Department of Finance “doesn’t own all the banks” and was only a moderate shareholder in others.

Underlying his position, he said: “We’re all in a space of wanting the banks to be successful and get out of [State] ownership.”

The rates controversy follows AIB’s decision to cut its variable interest rate by 0.25%, with AIB Group members EBS and Haven cutting rates by 0.38%.

The move will take effect before June and will benefit 160,000 customers, putting further pressure on other main banks to follow suit. However, the proposed moves by AIB will save mortgage holders on average about €40 a month.

Meanwhile, the annual report shows the exchequer is set to enjoy a €1.7bn windfall after the Central Bank recorded unprecedented profitability last year.

Profits hit a record €2.1bn in 2014 due to improving economic conditions and the sale of IBRC-liquidation related bonds, handing the Government hundreds of million of euro extra ahead of the budget.

Prof Honohan said his retirement in November was a show of faith that the economy, while still fragile, was now out of the crisis management phase.

He said the €1.2bn-1.5bn spring statement giveaway by Government may provide better “structure” for general election promises.


More on this topic

Short-term mortgage offers attract but may cost more in long runShort-term mortgage offers attract but may cost more in long run

Mortgage approvals increase slightlyMortgage approvals increase slightly

Set aside 30% of housing developments for first-time buyers, FF saySet aside 30% of housing developments for first-time buyers, FF say

Mortgage rule ‘tweaks’ anticipatedMortgage rule ‘tweaks’ anticipated


SECOND Captains is one of the long-running success stories in Irish podcasting. Ostensibly a sports show led by Eoin McDevitt, Ken Early, and Ciarán Murphy, the former Off The Ball team from Newstalk launched the podcast in mid-2013. two Monday shows are offered for free, with Tuesday-Friday behind a Patreon subscriber model and dubbed ‘The World Service’. It has more than 11,500 subscribers.Podcast Corner: First-class podcasts from Second Captains

The incredible life of Ireland’s first celebrity chef has been turned into a play, writes Colette SheridanHow Maura Laverty cooked up a storm

Their paths first crossed on the top floor of the library at University College Cork in October 2010 when both were students there so Amy Coleman and Steven Robinson were delighted to retrace their footsteps on their big day.Wedding of the Week: College sweethearts open new chapter

Peter Dowdall reveals why all roads will lead to Tullow in County Carlow on February 1Snowdrop patrol: Why all roads will lead to County Carlow

More From The Irish Examiner