Lenihan cannot give guarantee over rates

MINISTER FOR Finance Brian Lenihan cannot guarantee that mortgage interest rates will not increase in banks financed by the State.

Mr Lenihan told the Dáil that “no minister for finance since the foundation of the State has come in here and announced what mortgage interest rates are going to be in the future”. The Minister’s remarks came following reports that Permanent TSB was likely to raise its variable rate

However, he stressed that Permanent TSB was “not in receipt of any moneys from the State .... They’ve not applied to join the National Asset Management Agency”. He also pointed out that because of the number of tracker mortgages it had, Permanent TSB could not make any profit on its mortgage book at the interest rates charged by the European Central Bank.

“I should make clear that there is a clear commitment in the programme for government to protect family homes,” Mr Lenihan added. The Minister was responding to Opposition leaders who asked whether the financial institutions participating in the National Asset Management Agency would be increasing their mortgage interest rates.

Fine Gael leader Enda Kenny said the 70,000 mortgage holders with Permanent TSB were “the tip of an iceberg. This may well rise to 350,000 if other banks follow suit. We have bailed out banks to the tune of €11 billion last year” and up to €10 billion more might be required. “January has not even passed and at the first opportunity mortgage holders are about to be screwed again.” Labour leader Eamon Gilmore said people had been told the “corner had been turned” and the economy was improving but “we now know that mortgages are set to increase again”.

“There’s no Nama for householders who find themselves in negative equity or who find themselves in difficulty with paying their mortgage,” he said. He added that “not alone is there no relief or comfort for families who find themselves stretched . . . they are now being told . . . their mortgages are to increase again.” Mr Lenihan said the options for the board of Permanent TSB “are difficult”. Interest rates were at historically low levels and “the very large number of tracker mortgages issued by Permanent TSB means that that particular bank cannot in fact at the interest rates charged by the ECB make any profit whatsoever on its mortgage book”.

He also emphasised that “Permanent TSB has not applied to join Nama and it has not received one cent in capital from the State”.

Mr Lenihan added that “Permanent TSB is and has paid money to the State for the benefit of the guarantee. The suggestion will, no doubt, be advanced in the next 24 hours that we should withdraw the State guarantee from the banks.” The consequences of that “would be to increase the cost of funding for those institutions. These are commercial realities upon which all members of this house must reflect.”

Mr Kenny asked did that mean “that the Nama banks will not follow suit and increase mortgage interest rates for their mortgage holders”. Mr Gilmore said the Minister had said “this applied only in respect of Permanent TSB and you implied it is an exception because Permanent TSB had not received any capital from the State”.

But Mr Lenihan said “no minister for finance . . . has come in here and announced what mortgage interest rates are going to be . . . You chose to refer to Nama and banks collectively, ignoring the particular circumstances of the particular institution.”