The Dáil will this evening debate a Fianna Fáil motion demanding action from the Government and Central Bank to alleviate the situation faced by existing variable rate mortgage customers who are paying up to €1,000 a year more than those who can avail of offers available to new mortgage customers and €6,000 a year more than families with a tracker rate.
Fianna Fáil Finance spokesperson Michael McGrath has said recent developments whereby banks are cutting variable rates for new customers but not for existing clients have brought the issue in to even sharper focus.
Deputy McGrath commented: “A mortgage is the single biggest financial outgoing for a family. Tens of thousands of existing variable mortgage customers are paying exorbitant rates, considerably above those offered to new customers and substantially in excess of banks’ cost of funds. We have published an analysis of the interest rates that are charged to existing mortgage customers which showed a wide and growing disparity with existing customers on SVRs very much at the bottom of the pile.
“It is our belief that high variable rates are not justified based on the banks cost of funds which has been consistently fallen over the last 3 years. It is noteworthy that the standard variable rate for residential mortgages charged by State-owned permanent TSB and AIB / EBS as well as other banks operating in the market is up to 2% higher than comparable mortgage rates in other euro zone countries. Banks which operate both in the Republic of Ireland and Northern Ireland are on average charging customers in the Republic 2% more for a standard variable rate mortgage.
“It is very important to state that banks should not be burdening one group of captive consumers with costs of covering losses on the provision of tracker mortgages.
“Individual government politicians have made sympathetic comments about the issue but the reality is that there has been a complete lack of action on the part of the Minister for Finance. In fact the Economic Management Council has not met with the banks since June 2012. They have in effect taken a completely hands off approach to what is in effect a rip off of over 300,000 customers.”
There are a number of specific actions we want to see taken:
- Transparency from the banks as to the number of existing variable rate customers on their books and their cost of funds.
- Direct engagement by the Minister for Finance with the banks to persuade them to reduce variable rates in line with their falling cost of funds.
- A commitment by the banks to make reductions in variable rate mortgages available to all customers, not just new clients.
- Product innovation to make switcher mortgages available more widely.
- An examination of the level of competition across the banking sector and action to address deficiencies.
- Greater urgency from the Central Bank to uphold their role as the protector of consumer interests.