Banks may not pass on future rate hikes, says minister

BANKS may not pass on future interest rate hikes to mortgage holders if they can cut costs elsewhere, according to Junior Finance Minister Brian Hayes.

He said the Government would take a “very tough stance” with banks so they can absorb any further interest rate hikes from the European Central Bank (ECB) which yesterday increased rates by 0.25%.

The Coalition came under pressure from the opposition to keep a commitment in the Programme for Government that mortgage holders would be spared some of the increased interest rates.

The programme said banks would have to come up with a plan of “how it intends to cut its costs, over and above existing plans, in a fair manner and by a sufficient amount to forego a 25 basis point (0.25) increase on their variable rate mortgage”.

Mr Hayes said yesterday’s announcement was “most unwelcome” but added that it came just four weeks into his Government’s term in office

Cleaned up banks will be able to access private sector funds which will leave them “in a better position to forego some of the increases that may come on stream if the ECB decides to increase the rate”.

He said: “The Central Bank will be driving banks to get the costs down so those efficiencies can be passed on to hard pressed lenders.”

Tánaiste Eamon Gilmore said the Government was “concerned” about the ECB announcement which is expected to affect 800,000 Irish mortgage holders.

He said the Government was “very much mindful of the fact that something in the order of 44,000 households are in mortgage arrears and that an increase in interest rates will put an additional burden on families and households”.

Sinn Féin’s Mary Lou McDonald said: “This is not an issue that can wait. People are under pressure now; people are having their homes repossessed now; people cannot meet mortgage repayments now.

“This is another case of the Government long fingering an issue of great importance to families and people in distress.”

She said: “The Government moved very quickly to bail out the bankers, to have episode five of the bailout. Where is the legislation to protect mortgage holders who are struggling and in stress?”