14 August 2017
By Elaine Murphy
Key elements of FF Bill on mortgage rates will proceed in autumn
The latest Retail Interest Rates statistics published by the Central Bank show that mortgages rates are falling but certainly not at the same pace that deposit rates are falling, and mortgage rates in Ireland remain dramatically out of line with rates charged elsewhere in Europe, according to Fianna Fáil Finance Spokesperson Michael McGrath.
Deputy McGrath commented, “Today’s figures published by the Central Bank show that, despite modest reductions in mortgage rates, Irish mortgage holders are continuing to pay dramatically more than consumers elsewhere in Europe.
“For example, the interest rate on all new mortgages, fixed and variable, stood at 3.3% in June compared to a euro area rate of 1.83%. This means that a borrower with a mortgage of €200,000 is paying €250 per month more than they would be paying in the average Euro area country. That is €250 a month, each and every month. There has yet to be a credible explanation for such a dramatic difference in the rates charges.
“To add insult to injury, Irish consumers are not only paying higher interest rates on their mortgages, they are earning less interest on their savings. Today’s figures show that interest rates on new household term deposits stood at 0.08% in June, compared to an equivalent euro area rate five times greater at 0.4%.
“In May 2016, a Fianna Fáil Bill designed to give the Central Bank powers to tackle excessive variable mortgage rates passed second stage in the Dáil. The progress of the Bill through the legislative process has been tortuous and painfully slow. Despite not opposing the Bill at second stage, it is abundantly clear the Government does not want the Bill to become law.
“The Bill has undergone extensive pre-legislative scrutiny including an examination by independent legal counsel.This independent legal examination did not identify any serious concerns about the constitutionality of the Bill which would prevent its passage. Before the summer recess, the Minister for Finance, having consulted with the Attorney General, wrote to the Oireachtas Finance Committee referring to ‘significant constitutional issues’.
“The Minister suggested that an ex-ante independent economic analysis of the Bill be conducted ‘in order to guard against a successful constitutional challenge to the Bill’. This was the first time the Government suggested such a move and came fourteen months after the Bill passed second stage unanimously in the Dáil.
“The Committee has agreed to this analysis being undertaken and has asked that such an analysis includes an assessment of the reasonableness of the mortgage rates charged in Ireland given the factors that feed into mortgage pricing.
“In addition, while this independent economic analysis of the Bill is proceeding, it is my intention to seek Committee approval to proceed with other key aspects of the Bill which could help to bring down mortgage rates.
“In particular, the provisions in the Bill prohibiting discrimination by lenders between new and existing customers and the proposed ban on so called ‘cash back’ offers so that lenders are forced to compete on rates, both would be of significant benefit to mortgage holders. Many existing mortgage holders are paying rates as high as 4.5% – these provisions would help them get their rates down to the rates on offer to new customers.
“I will be proposing that the Committee Stage on these aspects of the Bill proceed without further delay so that they can become law as quickly as possible while we are awaiting the independent economic analysis on the other key provisions of the Bill,” concluded McGrath.