Ed Sibley, director of credit institutions supervision, told the Oireachtas Finance Committee the average Irish mortgage rate excluding tracker mortgages, at 3.78%, was justifiable because banks here had to tap more expensive wholesale funds, faced much higher risks of borrowers defaulting on their loans and had higher costs too.
Mr Sibley said that the Variable Rate Mortgages Bill — sponsored by Fianna Fáil finance spokesman Michael McGrath — “may have the entirely unintended effects of stifling competition and innovation and dissuade entry of new participants to the Irish market.”
“We have seen some nascent signs of restoration in competition, with the reductions in variable rates, some increasing product differentiation, and potentially some small new entrants, but this is not of significant scale at this stage,” Mr Sibley said.
Ever since Fianna Fáil unveiled plans last spring to give the Central Bank powers to set limits to variable mortgage rates, the regulator has said it does not want the powers.
Lenders have also said there are good reasons for charging comparatively high rates, but consumer advocates say the rates are still far too high.
Yesterday, Mr McGrath said: “Interest rate caps are already in place in Ireland in relation to credit union loans and lending by licensed moneylenders.
“The ECB has informed us that a series of countries across the EU, including France, Italy, Portugal, Slovenia, Croatia, Estonia, and Cyprus, have restrictions in place on the maximum interest rates that can be charged on mortgages.”
He said Irish borrowers “pay well over the odds”.