Brian Hayes to raise mortgage rate data with ECB

MEP for Dublin Brian Hayes has disputed Central Bank figures for Irish mortgage rates and plans to raise the matter with the European Central Bank, which has assumed responsibility for financial supervision in the euro zone.

"The Central Bank of Ireland says that the rate for new mortgage business in Ireland is currently at 3.47 per cent, but it is clear that the average standard variable rate which Irish banks are charging is closer to 4.5 per cent," he said.

Mr Hayes, a member of the economic and monetary affairs committee of the European parliament, said the Central Bank's figures were "distorted" because they included restructured tracker mortgages as new lending, despite the fact that trackers have not been issued here since 2008.

The ECB interest rate on which trackers are based is at an all-time low of 0.05 per cent, Mr Hayes added.

“I am seeking a meeting with the ECB to explain the anomaly of the Central Bank’s calculation methods. The mortgage market is a daunting place for first-time buyers considering the Central Bank’s planned proposals for a 20 per cent deposit [for new home loans], along with the excessive standard variable mortgage rates being offered,” he added.

Underlying issues

“The ECB needs to take a proper look at the Irish mortgage market and examine the underlying issues. Irish mortgage-holders are not paying a fair price that is in accordance with current euro zone market levels and I think the ECB as newly appointed supervisor of Ireland’s main banks need to take action on this,” he said.

Mr Hayes said the ECB reduced its repo rate to 0.05 per cent in an effort to stimulate the euro-zone economy and mortgage lenders across the zone had responded by reducing the mortgage rate to an average of 2.6 per cent.

‘Excessive’ variable rates

“Yet in Ireland, banks have gone in a different direction by charging excessive standard variable rates,” Mr Hayes said. “

Permanent TSB

confirmed to the

Oireachtas

finance committee last week that its average variable rate is 4.30 per cent, while

AIB

and Bank of Ireland offer similar rates for their products.”

In September, ECB president Mario Draghi informed Mr Hayes by letter that the Central Bank's mortgage statistics were in accordance with ECB regulations.

Mr Hayes said there “seems to be a lack of understanding on the part of the ECB as to the specific nature of tracker mortgages and the number of them on the books of Irish banks”.

Mr Hayes’s comments on the Central Bank’s statistics comes just days after he told the Banking & Payments Federation Ireland’s national conference in Dublin that the regulator’s plan to require borrowers to have a 20 per cent deposit to get a home loan was “unfair” and called for cheaper longer-term loans to be introduced.

He also said the variable rates charged by banks in Ireland were a "disgrace" compared with rates charged by banks in continental Europe.

Mr Hayes was a minister of state at the Department of Finance and Public Expenditure and Reform from 2011 until his election to the European Parliament this year.