Central Bank resistant to capping mortgage interest rates 

Homeowners face more hikes in repayments after the European Central Bank this week raised interest rates for the seventh time in less than a year. Picture: Denis Minihane

The Central Bank is resistant to setting a cap on mortgage interest rates that can be charged by banks.

It comes as homeowners face more hikes in repayments after the European Central Bank this week raised interest rates for the seventh time in less than a year.

Finance Minister Michael McGrath has spoken with the Central Bank about interest rates charged by vulture funds but has also explored the option of providing the institution with extra powers to put limits on the level of interest the main pillar banks can charge.

However, it is understood the Central Bank told the minister it did not believe this was a role it should have and did not think these extra powers were warranted.

It is understood Mr McGrath has, however, ordered the Central Bank to assess whether the underlying funding model for vulture funds in the non-bank sector warrants the high rates of up to 7% they are now charging some customers.

Homeowners whose mortgages were bought out by vulture funds have been raising frustration that they cannot shop around for lower rates as they are being stopped from switching back to the main pillar banks.

Mr McGrath told a private Fianna Fáil meeting this week that he believes there should be a distinct code of conduct on mortgage switching and suggested to the Central Bank it should draw up this code.

It comes as the Government comes under mounting pressure to support struggling mortgage holders, with some homeowners on tracker rates now paying €420 more a month and with little sign of respite.

Junior Finance Minister Jennifer Carroll MacNeill cautioned against rolling out mortgage interest relief and said she would favour 'people getting more money back in their pocket' through other budget measures. Picture: Moya Nolan

While the Government has indicated every measure will be considered, ministers are wary of reintroducing mortgage interest relief due to the cost implications.

Junior Finance Minister Jennifer Carroll MacNeill cautioned against rolling out mortgage interest relief and said she would favour "people getting more money back in their pocket" through other budget measures.

She said there would be "significant advantages" in choosing an income tax package instead of mortgage interest relief.

Mortgage interest relief is one way of doing that, but what we have seen before and the OECD analysis of it is that it benefits people who are the wealthiest, who have the highest incomes, who have the highest mortgages. 

"What I would like to see is that everybody benefits, particularly those who really are at the pin of their collar, the squeezed middle," she told RTÉ's Today with Claire Byrne.

Justice Minister Simon Harris said the Government was acutely aware of the impact of decisions to increase interest rates on family budgets and on any individual paying  mortgage.

He said: "The Government keeps an open mind on how best to help people.

"The Government will between now and the budget continue to look at a variety of ways in which you can help all people with the cost of living, including mortgage holders, so we're not as fixed on which method. There's a whole variety of ways we will look at it, just as we did in the last budget.”

He added: "As we see inflation now beginning to be tamed, price is beginning to fall in some cases. I think it is important that the ECB reflects quite seriously on the real-life impact of those decisions."