Fianna Fáil Finance spokesperson Michael McGrath has today accused the banks of engaging in a concerted campaign to maintain high variable mortgage rates in the face of overwhelming evidence that they are out of line with rates in the rest of Europe and the cost of funds that the banks face.
Deputy McGrath commented: “Today’s meeting between the banks and the Minister for Finance is likely to provide just another PR opportunity for the banks to claim that they have been responding to widespread anger amongst the public on this issue. The reality is that the banks have adopted every stalling tactic possible. The Minister for Finance has effectively been given the run around for the last six months since the issue was put on the Dáil agenda by a Fianna Fáil motion.
“Their response to date has been totally inadequate. Despite the fact that variable rates in Ireland are more than 2% higher than the euro area average, the only bank to offer a straight cut in its variable rate has been AIB and its EBS and Haven subsidiaries. Bank of Ireland still has a standard variable rate of 4.5%. PTSB has offered a change to its pricing which leaves it still charging a 4.3% variable rate to borrowers above 90% loan to value. The issue has not been resolved. In effect banks have openly defied the Minister.
“AIB recently announced that it had raised substantial funds at a cost of just 0.66pc a year. This highlights the extraordinary low cost of debt for banks in the markets, driven down by a number of factors including the policies of the ECB. It shows the extent to which mortgage customers are being ripped off.
“Bank of Ireland and KBC have left their variable rates unchanged and only offered a reduction in fixed rates for periods of 2 – 5 years. It is important to state that this may not be suitable for large numbers of customers. They would not be able to benefit from future rate reductions or lower rates from new market entrants. For mortgage holders who want to sell their home while on a fixed rate mortgage they would have to pay a penalty for breaking the fixed term early. If you have a variable rate mortgage, you can overpay without penalty at any time. If you fix your interest rate, depending on the lender you may not be able to pay lump sums off your mortgage without a penalty.
“AIB and Bank of Ireland have already returned to profitability and PTSB is set to do so next year. This is a welcome development and is in the interests of the State. However the need for profitability is not a justification for ripping off mortgage customers. In fact global ratings agency Fitch has stated that if banks reduced the costs of home loans, the move would make the debt more affordable for the borrower to service. This would ultimately make it easier for banks to get their money back.
“As well as legislation to give the Central Bank the power to cap variable rates, we would require banks to treat new and existing customers equally,” concluded Deputy McGrath.