Michael Noonan to meet Central Bank Governor on ‘extortionate’ mortgage rates

Minister for Finance Michael Noonan will on Thursday meet the governor of the Central Bank to discuss the high mortgage interest rates banks charge homeowners.

Mr Noonan told the Dáil on Wednesday that when he meets Patrick Honohan he would "request that he considers how best to influence the banks to reduce standard variable rates charged to borrowers".

He said, however, that it would be “simplistic to say that a ceiling should be set for mortgage rates and expect that there would be no consequences other than reduced rates”.

But he said while it was accepted that additional competition would reduce prices to consumers, borrowers had a role to play.

He said homeowners in a position to move mortgages should look at their options to do so. People could be put off by the costs involved in switching but some institutions paid some or all the fees involved.

“I fully accept that this is not an option for everyone but I would encourage people to take the time to explore it.”

Influence

Mr Noonan was speaking at the conclusion of a Fianna Fáil Private Members’ motion introduced by finance spokesman Michael McGrath, calling on the Minister to use his influence directly with the banks and for the Central Bank to do the same. “Standard variable rate mortgage customers are an exploited group of customers,” he said.

“They are paying way over the odds and something needs to be done about that.”

In the Dáil earlier, during finance questions, Mr McGrath said Bank of Ireland had admitted its cost of funds was 1.15 per cent but the standard variable rate for existing customers was 4.5 per cent. "That is extortion by any measure."

He said the bank had given the reduced rate to new customers, “but not to existing customers who form part of the 300,000 customers affected”.

Mr Noonan said Mr McGrath’s views were shared widely across the House. He said he would ask the governor of the Central Bank to consider “what influence the Central Bank can bring to bear to bring variable mortgage rates closer to the cost of funds”.

Significant influence

Mr McGrath said he fully accepted neither the Minister nor the Central Bank set interest rates “but you have significant influence” and he hoped Mr Noonan would “bring your influence to bear on the banks”.

The Minister told him: “I will do my best to do as the deputy requests, in accordance with the legal powers I have.”

Mr McGrath said homeowners were paying 4.5 per cent when ECB charges to financial institutions were at their lowest ever rate of 0.05 per cent.

More than 300,000 Irish mortgage holders are paying over 2 per cent more on average than homeowners in other euro zone countries.

Earlier Taoiseach Enda Kenny said, “I expect the banks to do better than they have been doing in respect of variable mortgage interest rates.”

Sinn Féin leader Gerry Adams claimed the Taoiseach had given the banks a veto.

Mr Kenny said the Government restructured and recapitalised the banks and this was not done “for the benefit of the bankers. It is for the benefit of customers.”