Report to advise against variable mortgage rate cut

Government plans to force banks to cut deals with people in mortgage arrears look set to be overshadowed by a Central Bank report which will claim variable interest rate customers are not being “gouged” by the institutions.

As part of popular and long-awaited moves to address the repossessions crisis, the Coalition will on Wednesday publish a detailed document outlining how it will effectively quash controversial bank vetoes on reasonable debt restructuring deals.

The plan was drawn up by the Government’s economic management council amid growing public and political pressure to resolve a crisis affecting 100,000 families nationwide. It will attempt to remove the bank veto on mortgage repayment deals by allowing homeowners to appeal cases to the courts and by giving greater oversight of the decisions to an independent body.

The measure will only be available for people who can prove they have made all reasonable attempts to repay their mortgages.

Asked about the move yesterday, Tánaiste Joan Burton said it should be seen as a “personal examinership” system similar to business examinership whereby a debt can be “intensively” examined and addressed, with “liquidation” — the business equivalent of a home repossession — only considered as a “last resort”.

However, the hoped-for boost in public popularity resulting from the step is likely to be short-lived, with a Central Bank report due to be published in the next 48 hours expected to state separate political calls for variable interest rate cuts are inaccurate and that people with these mortgages are not being “gouged” by the system.

It is understood the report will make it clear that banks are correct not to pass on ECB variable interest rate cuts despite a Government and opposition clamour for the move in recent weeks.

As banks are losing money on tracker mortgages, it will say they need to keep current variable rates intact and that to do otherwise would threaten their financial stability.

Finance Minister Michael Noonan — who sought the report last month — declined to comment when contacted.

Fianna Fáil finance spokesperson Michael McGrath said the report is a “complete cop out” and shows that the Central Bank is failing in its “key role as a consumer watchdog”.

“The thrust of what they are saying is that variable rate holders can be exploited in order to make up for losses elsewhere in the system. In any person’s language that is a rip off,” he said.

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