Fianna Fáil Finance Spokesperson Michael McGrath has said he is dismayed at reports that the Central Bank is siding with the banks and not 300,000 mortgage holders paying variable mortgage rates which are double the euro zone average.
Deputy McGrath was reacting to media reports that the Central Bank’s analysis of variable mortgage rates has concluded that variable rate mortgage holders are not being treated unfairly and has recommended that no action be taken on the issue.
Deputy McGrath also released a letter he received last month from the Governor of the Central Bank on the issue of standard variable mortgage rates.
Deputy McGrath commented: “Reports that the Central Bank is recommending that no action should be taken to force the banks to reduce variable rates will come as a bitter blow for families throughout the country. It is extremely difficult to understand how the Central Bank could arrive at that conclusion based on the evidence which is before us. The margin earned by banks on variable rate loans has grown dramatically as their cost of funds has fallen. Variable rates in Ireland are now so high that a customer with a €200,000 mortgage and 20 years left to run is paying €4,000 a year in additional interest when compared to a similar customer in other European countries. That the Central Bank does not see a problem with this simply beggars belief.
“The Central Bank cannot operate in a bubble focusing solely on the profitability of the banking sector. It also needs to take into account its vital role as a watchdog protecting the interests of consumers. In recent years, as the ECB rate has fallen to a historic low and banks have reduced the rates they pay for deposits and bonds, these same banks have been consistently increasing their variable rates. Some banks now have a cost of funds of 1% but charge 4.5% on variable rate mortgages. How can the Central Bank stand over this?
“The Central Bank must recognise its pivotal role in dealing with these issues. While we await the formal publication of the Central Bank report on the issue of variable rates, it is important to emphasise that the time has long since passed when a hands off approach can be accepted. Mortgage customers have a right to expect that action will be taken without further delay. I am calling for the publication of the Central Bank report as soon as possible. Fianna Fáil will study its findings and bring forward legislative proposals in response.”