Hayes calls for Irish probe on mortgages

Rip-off mortgage rates are an Irish problem that should be investigated by the Irish authorities, the European Commission has said.

But the Irish Competition and Consumer Protection body told Dublin MEP Brian Hayes it is not up to them.

Mr Hayes said: “It’s like playing a game of pass the parcel. No one wants to investigate this.”

He believes there is a real case for doing so with the latest figures from the ECB showing the variable standard interest rate average across the EU at just over 2% and Ireland’s at 3.24% — the highest rate after Cyprus.

This is despite all eurozone banks, including the Irish, paying the same interest rate to the European Central Bank of 0.05%.

“This is clearly not being passed on to Irish mortgage holders,” he said.

He has identified the problem as a lack of competition between the Irish banks and points out that there are just five mortgage providers in the country now compared to 28 in Northern Ireland.

“The mortgage market in Ireland is dysfunctional. There is no competition and this has allowed Irish rates to soar. When you look at what is on offer in other counties you see 10 and 20 year fixed products — there is just a tiny percentage of mortgages in Ireland at fixed rates,” he said.

He asked the internal market commissioner Jonathan Hill what the commission could do to ensure Irish consumers are treated fairly in relation to variable mortgage rates, and how it could address the lack of competition between banks and why other banks were not entering the market.

“Will it consider conducting an enquiry into standard variable mortgage rates across Europe?” he asked Commissioner Hill. “Given that banks interest rates’ are set by a European institution, I believe that the European Commission can take action.”

The commissioner acknowledged there may be a violation of competition law, but did not believe it was up to Brussels to investigate.

“Give the alleged anti-competitive effects are limited to the Irish mortgage market and do not seem to affect trade between member states appreciably, the Irish Competition authority seems well placed to deal with the alleged violation of competition law in this instance,” he told the Fine Gael MEP.

However Mr Hayes had already taken his case to the Consumer Protection and Competition Commission, but was told it was a matter for the Central Bank and the Department of Finance.

“The Department of Finance owns one of the banks and has a major share in another so it is not in a position to do so I believe,” he said.

A report issued earlier in the year by the Central Bank pointed out that the banks were relying on the higher interest rate from variable mortgages to make up for the losses they felt they were suffering from the tracker mortgages currently at just over 1%, and accounting for about 51% of all mortgages.

However, Mr Hayes said tracker rates will rise in the future and this was an issue that needed to be resolved now. He added that the outgoing governor of the Central Bank, Patrick Honohan, warned the lack of competition was a crucial factor.