Fianna Fáil call for law to rein in banks

The “scandal” of banks routinely overcharging customers with inflated standard variable mortgage rates needs to be stopped with new intervention powers for financial regulators, Fianna Fáil insists.

The party’s finance spokesman, Michael McGrath, says banks have ignored Government calls for them to act on the issue and now need to be forced into line.

Introducing opposition legislation to move against the banks, Mr McGrath said this is the last chance to take action before the general election which must be held by next spring.

Finance Minister Michael Noonan’s attempts to persuade banks to offer fairer mortgage rates have ended in failure, Mr McGrath said as he called for the Central Bank to be given new powers to bring lenders into line.

“The banks have sought to deny the existence of a problem or fob customers off with minor changes to their rates, most recently with a number of banks announcing a reduction in their fixed rates. Reducing fixed rates is simply not an adequate response for SVR customers.

“For example, Bank of Ireland will not allow existing customers to fix for a period of less than two years... Mortgage holders who want to sell their home while on a fixed-rate mortgage could end up having to pay a penalty for breaking the fixed-term early,” he said.

“Our legislation is comprehensive and would apply to all entities providing, managing or administering mortgages. This is very important as it would bring in the 46,000 mortgages held by non-bank lenders, including those that have been sold to vulture funds. The Central Bank would be required to carry out an assessment of the state of the mortgage market taking into account factors such as the banks’ cost of funds; reasonable profit expectation; concentration within the market; the ease with which borrowers can switch mortgages between lenders and extent to which they are switching.”

The Central Bank would be able to alter interest rates where it considered intervention necessary under the Fianna Fáil proposals.

Mr McGrath said action was also needed to stop banks discriminating against older customers by offering new borrowers “golden hello” deals. Fianna Fáil has accused banks of “gouging” customers over mortgage rates by not passing on lower fees they incur to borrowers. This means that on average Irish borrowers pay 2% more than in the rest of the eurozone.

However, the Central Bank is opposed to extra powers over interest rates.