Domestic action essential for tackling rip-off mortgage rates – McGrath

Fianna Fáil Spokesperson on Finance Michael McGrath has poured cold water on claims that a European wide mortgage market could offer the solution any time soon to rip-off mortgage rates being endured by Irish variable rate customers.

He was responding to reports of a draft Green paper being produced by the European Commission which aims to open up the market for financial services across mortgages, deposits and insurance. In theory, this could allow house buyers to borrow from a bank outside their home country, something that is effectively impossible at the moment.

Deputy McGrath commented, “I welcome the analysis from Fine Gael MEP Brian Hayes that Irish customers face ‘rip-off prices’ for variable mortgage rates. He is correct in stating that ‘the average variable mortgage rate in Ireland is 4.18%, close to double the Eurozone average’. However he seems to be setting his sights on a Europe led solution to this problem.

“The reality is that the wheels of European bureaucracy move very slowly. We have been hearing about action to reduce mobile phone roaming charges for years but it still has not been delivered in practice. I would welcome the creation of a European single market for financial products but we cannot assume that it is going to happen any time soon.

“The language coming from the European Commission that it will hold a conference in the Spring to “consult with stakeholders” before considering further action is typical of the leisurely pace at which the bloated European institutions carry out their business. The reality is that many Irish mortgage customers could be retired by the time the European Union comes to their rescue.

“This is a problem we need to solve at home. In October, the Minister for Finance closed the door on taking any action on the issue of rip-off interest rates saying he wants to wait a number of months to see if competition forces down rates. This is a serious climb down from the Minister who had previously threatened to increase the levy on banks or introduce legislation to give the Central Bank powers to tackle excessive interest rates.

“Minister Noonan’s belief is that competition alone will solve the problem. While customers are to be encouraged to shop around, the truth is that switching a mortgage from one lender to another can be difficult and is not an option open to everyone.

“We need a strong legislative framework to deal with this issue. That is why Fianna Fáil has published the Central Bank (Variable Rate Mortgages) Bill 2015 which would amongst other measures allow the Central Bank to impose a cap on mortgage rates where it deems it appropriate.

“Such interest rates caps already apply in Ireland in respect of credit union loans and moneylenders. Given that a mortgage is the biggest financial commitment most people enter in to during their lives there is an even stronger case for the Central Bank to have the power to set a maximum rate. This also occurs in other European countries and is a far more practical solution than waiting for the European Union to get its act together,” concluded Deputy McGrath.