Michael Noonan to shame banks into cuts on mortgage rates
The central bank is compiling a report on what type of profits banks are earning on variable mortgage rates here, which are more than double those charged elsewhere in the eurozone.
Finance Minister Michael Noonan yesterday signalled that institutions would have to respond as he warned that he would have no qualms about hauling in bank bosses over the matter.
Figures yesterday showed that 16,683 borrowers in difficulty faced losing their homes by the end of 2014.
The loss of a home was involved in a third of all mortgage arrears resolutions concluded with private homeowners by the end of last year, the central bank figures show.
By the end of the year, 67,617 solutions were agreed by banks in mortgage arrear cases.
Mr Noonan yesterday met central bank governor Patrick Honohan following a week of demands in the Dáil for banks to cut variable mortgage rates.
They both insist they will not intervene in commercial banking matters and that competition is the best way to help customers.
However, more than 300,000 families are on high variable rates of up to 4.5%. The difference between here and other member states sees families having to pay an extra €3,300 per year.
While the Government is set to launch relief measures on bankruptcy and insolvency later this month, the Coalition is under pressure to rein in the banks.
Speaking after his meeting with Mr Honohan, Mr Noonan said lenders could be embarrassed into passing on European Central Bank cuts onto their own rates.
“If the [central] bank could do some research work to show what a reasonable margin would be above the cost of money on the markets or whether what the banks are charging now is excessive or not, that would be helpful in the debate because the banks will respond to reasonable argument I believe,” he said.
Department of Finance sources say the key question is whether current rates are justifiable now that banks are in profit and charges are so far removed from the cost of sourcing funds.
“I don’t think the banks can sustain a position where their rates are demonstrably higher than equivalent rates in Europe,” said Mr Noonan.
“I’ve no reluctance to talk to CEOs of the banks at any stage and I’ve done so regularly and I can say ‘here are the facts, what’s your response?’”
The central bank research is expected to look at the disparity between Ireland and other eurozone members, as well as Britain. It is also expected to be published.
Mr Honohan has previously said tight controls over mortgage interest rates would be counterproductive in ensuring an easy flow of credit. However, he has publicly said that if local banks charge unnecessarily high interest rates, that will be an inducement for new entry into lending here.
The move to help borrowers comes as exchequer figures yesterday show that over €500m more than expected was collected in tax payments in the first quarter this year. Department of Finance data shows that the public finances were in surplus by €197m at the end of March.
The figures also reflect a rebound in income tax payments and a spike in corporation tax revenue, while the Government is set to spend less than anticipated in the budget as rising employment lowers welfare payments.
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