Noonan: I will make new law to allow mortgage rate cuts if Central Bank wants

Minister for Finance Michael Noonan has said he is prepared to introduce legislation giving the Central Bank control of variable mortgage interest rates.

He told the Dáil on Thursday the rates were currently determined by the financial institutions as a result of commercial decisions made by them. Equally, the Central Bank had no statutory role in the setting of rates by regulated entities, apart from the cap imposed on the credit union sector.

“However, if the Central Bank proposed to me they should get control of the regulation of interest rates, I would legislate for that,’’ Mr Noonan added.

He said he expected to receive a review of the rates charged by lenders from Central Bank governor Patrick Honohan ''in the coming days'' and he would then discuss the issue with the six principal mortgage-lenders.

The Minister was replying to Fianna Fáil finance spokesman Michael McGrath who said it was very clear now that Bank of Ireland, Ulster Bank, and a number of other banks, were "playing hardball'' and would not roll over when called into a meeting in the Department of Finance.

While the AIB reduction was modest, it was a step in the right direction, Mr McGrath added.

He said a one per cent across-the-board cut would put about 400 million euro into the pockets of mortgage-holders in 300,000 families around the country.

“That would be a very significant boost and stimulus to the domestic economy,’’ Mr McGrath added.

On Wednesday, Taoiseach Enda Kenny told the Dáil the Government is to introduce “further options’’ next week to assist borrowers with mortgage arrears.

The Taoiseach was replying to Fianna Fáil leader Micheál Martin who asked if the Government planned to change the veto the banks had over the entire process.

Mr Martin added the Government had been asked for four years to end the veto. “Something has to happen to change the status quo,’’ he added.

Mr Kenny said he rejected Mr Martin’s assertion that the Government continued to take the side of the banks.

“It is entirely false and beneath you to say that,’’ he added. He said it was Mr Martin’s “usual populist line’’.

Mr Kenny said it was the mess Fianna Fáil left behind four years ago which caused the current difficulties.