The European Central Bank (ECB) must act in view of the rip-off interest rates being charged on new mortgage loans and SMEs, and the failure of the main banks in Ireland to pass on successive ECB rate cuts to SMEs, variable rate mortgage holders and other personal borrowers, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath was speaking as the ECB prepares to take over the regulation of the mains banks in Ireland in November as part of the Single Supervisory Mechanism.
Deputy Michael McGrath stated, “The ECB’s main refinancing rate stands at a historic low of 0.05% following a series of rate cuts. While the customers of Irish banks on tracker products have benefitted directly from these rate reductions, others have been denied the benefit of the rate cuts. SMEs, variable rate mortgage holders and other personal borrowers continue to pay interest rates in Ireland that are dramatically out of line with other eurozone countries.
“In announcing the various ECB rate cuts, Mario Draghi has repeatedly said that banks should be passing on the cheaper finance to their customers. This has not happened in Ireland. Instead, the banks seem determined to squeeze as much as they can from customers on variable rate products and they are being allowed to get away with it by the government and the Central Bank.
“While the Irish government can access new borrowing at cheap, attractive rates of interest, the same cannot be said for the customers of Irish banks. The average interest rate being charged in the euro zone for new residential mortgages is 2.64%. The Central Bank’s claim that the rate for new mortgage lending in Ireland is 3.15% is deeply misleading as it includes the restructuring of existing tracker mortgages. In truth, a new mortgage holder in Ireland can expect to be paying around 4.5% depending on loan to value.
“Similarly, the average interest rate charged to SMEs for new loans in Europe stands at 3.57%. The Central Bank says the comparable Irish figure is 4.9% but again this does not represent the real cost of new borrowing for SMEs, which is much higher.
“Given their role in the economic collapse, it is not acceptable that banks in Ireland continue to inflict pain on struggling businesses and homeowners by charging penal interest rates for their products. Since the government has washed its hands of the issue, the only hope now is that the ECB will act when it takes over the regulation of the banks in November.”