Fianna Fáil Spokesperson on Finance Michael McGrath has strongly criticised the Tánaiste Joan Burton for effectively washing her hands of the problems facing thousands of mortgages holders being forced to pay exorbitant interest rates.
Thousands of customers are being charged standard variable rates of up to 4.5%, substantially above what is charged in other European countries.
Deputy McGrath commented: “In the Dáil today I highlighted the fact that for a person with a mortgage of €200,000, the difference in interest every year is approximately €4,000 compared to a similar household in another eurozone country. It is completely unacceptable that at a time when the cost of funds for the banks is decreasing and their net interest margin is increasing that the cost of variable rate mortgages is not coming down, with the exception of the very welcome move announced recently by AIB.
“The Tánaiste flat out refused to engage on the subject even though it affects 300,000 mortgage holders in this country. She engaged in a master class of evasion and waffle to avoid providing any meaningful answers. Some of her coalition colleagues have been very vocal on the issue but the Tánaiste and fellow ministers refuse to take any action.
“We are not asking the Central Bank or the Minister for Finance to direct the banks as to what level to set mortgage rates. However Fianna Fáil believes a greater degree of oversight is needed in respect of how banks treat customers in the context of a market which cannot yet be described as having returned to normal. If we were operating in a competitive market, customers would be able to move their mortgage to another provider, but the market for mortgage switching is effectively closed. Very few variable rate customers are able to switch their mortgage to a different provider to avail of a better deal, particularly if their home is in negative equity. In the context of a dysfunctional banking market there is a clear need for action to help customers who have been made take a disproportionate share of the burden of banks’ attempts to return to profitability.
“In the UK banks are required to operate under the “Treating Customers Fairly charter”. Last November the Director of Supervision at the UK Financial Conduct Authority, wrote to the banks to highlight his concern that the factors driving changes to SVRs may not always be transparent to consumers and may be unfair in terms of consumer contracts regulations. I believe the situation in relation to the standard variable market is even more acute in Ireland given that there is a reasonably competitive market in the UK for mortgage switching.
“The Government needs to make it very clear to the banks, in particular the ones owned by the State, their concern regarding banks unfairly targeting SVR customers in an effort to make up for losses they are making elsewhere in their loan book. I am asking for the Government to engage directly with the banks to ensure that the interests of consumers are protected. There is no justification for the continued indifference which is being shown by Ministers on this issue.”