State urged to press again for mortgage relief

The Government has been urged to again press the main banks to reduce mortgage costs for borrowers with claims that little has changed ahead of a deadline for lenders next week.

Not one of the six main banks have reduced their variable interest rate mortgages, Fianna Fáil said yesterday.

Finance Minister Michael Noonan has set a deadline of July 1 for banks to reduce mortgage costs after a recent outcry on sky-high variable rates.

Fianna Fáil finance spokesman Michael McGrath noted that since bankers were hauled in for meetings last month, that little had actually changed.

“AIB had pre-announced a rate cut before meeting with the minister, while Bank of Ireland has announced a reduction in its fixed rates. To my knowledge, there has been no response from KBC, Permanent TSB, Ulster Bank or ACC,” he said.

He said the concern centred around variable rates, which Mr Noonan had noted were too high.

Responding, Mr Noonan said lenders should still be given more time to make changes, including moving borrowers over to fixed rates. “They have until July 1 and we will see at that stage. Officials in my department will review progress over the coming weeks and a follow-up set of meetings with each of the six banks will take place in September in advance of the budget.

“Time should now be allowed for the banks to act on this matter. However, it should be noted that the banks have started to make some welcome changes on this issue which can offer real savings to mortgage holders.”

But Mr McGrath fired back at the minister during Dáil questions that not a single bank has reduced variable interest rates with just a week to go. He noted that a fixed-rate mortgage locks customers in for a period of time.

Mr Noonan defended the standalone moves to fixed rates, as opposed to reductions in variable rates for borrowers: “If the banks have fixed rates over time, they can fund against the fixed rate arrangement at a lower rate than they would fund for variable rates on the market.”

Government sources have insisted that rate cuts of up to 0.75% overall can be expected over the coming year. The average Irish variable rate is 4.26% – 2% higher than the eurozone average. It is also 3% higher than tracker rates here.

Meanwhile, the minister has agreed to examine reducing inheritance taxes in the budget after a huge hike in amounts being levied against families facing Revenue bills.

The threshold for parent to child inheritance has fallen by almost 60% since the crash, Mr McGrath highlighted, resulting in a rise of 34% in the number of people liable for inheritance tax.

Mr Noonan responded: “I am reviewing the various aspects of this tax in the context of the preparations for budget 2016 and the subsequent finance bill.”

But the Fianna Fáil TD said the tax had to be reduced for families.

“This is an issue as people like to leave an inheritance if they can for a family but neither families nor the people leaving an inheritance like the idea of paying a big chunk of that to the minister. I am sure he accepts that. The thresholds must be addressed and I would like to see the indexation of the thresholds revisited, along with the interest rate – at almost 8% – which applies when somebody decides to pay the inheritance tax liability over a number of years.”

Mr Noonan pointed out there are exceptions for families facing capital acquisition taxes, particularly if a son or daughter lives in a property prior to inheriting it.