Minister for Finance Michael McGrath has urged banks and non-bank lenders to “work in a spirit of co-operation” with borrowers dealing with a series of interest rate increases over the last 12 months.
“I have met with the banks. I have met with a number of the non-bank lenders as well. I think they do now have an obligation to work in a spirit of co-operation with borrowers to help them and to put in place solutions for them to get through what is going to be a very challenging period for many households,” Mr McGrath said on Friday.
[ AIB profits jump 79% amid boost from interest rate hikesOpens in new window ]
[ Many worse off by more than €5,000 a year as a result of nine ECB rate hikesOpens in new window ]
He said the “overwhelming majority” of mortgage holders who are making a genuine effort to pay off their debt must not be allowed to fall in to arrears arising out of a decision on Thursday by the ECB to raise interest rates for the ninth consecutive time in 12 months, he added.
Speaking in Cork, Mr McGrath said that he understood the impact the issue could have on households nationwide, calling on banks and mortgage lenders to utilise existing codes of conduct to work with homeowners in a bid to avoid repossessions.
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“The ECB is independent in its decision making and I acknowledge as Minister that the further announcement yesterday, which is the ninth increase in 12 months, is going to have a real impact on mortgage holders all over the country.
“My message for banks, but also for non-banks [who provide mortgages], is that they have to work now genuinely with borrowers to make sure that people who are making an effort to repay their mortgage are not allowed to fall in to arrears.
“We need to ensure that a code of conduct in mortgage arrears, that the other statutory protections that are there are fully deployed, and that solutions are put in place to help people get through what is probably going to be a temporary period of high rates.”
Also speaking in Cork, the Tánaiste said he was cognisant of the pressures faced by mortgage holders following the latest interest rates increase by the ECB.
When asked about banks such as AIB making large profits while mortgage holders are under pressure with the ninth ECB interest rate in just over a year, Mr Martin stressed that in “some respects banks are much healthier now”.
“But no doubt there are pressures on mortgage holders because of the increased interest rates. And again over the last year we have endeavoured to deal with the cost of living increases more generally.
“There was a view some years back that mortgage interest relief wasn’t the most effective or targeted way of dealing with the issue but, in the round, we will look at cost of living in combination with the Budget in the Autumn and see what we can do to alleviate relief for people under particular pressures.”
Mr Martin said the Government wants more competition in the banking market. “The banks need to ensure that they can make sure that their customers are protected and facilitate them if they are coming under difficulty. That is something we will keep under review,” he said.
Mr McGrath said the hike in interest rates over the last 12 months, had come as “quite a shock and a very sudden shock” to household budgets after over a decade of historic low rates.
“I have met with the banks. I have met with a number of the non-bank lenders as well. I think they do now have an obligation to work in a spirit of co-operation with borrowers to help them and to put in place solutions for them to get through what is going to be a very challenging period for many households.”
The Minister said he would look at mortgage interest relief in the budget while recognising that there will be “limited resources”.
“On the tax side we have earmarked a package of about €1.1 billion and we have given a commitment that there will be changes in income tax for example consistent with the Programme for Government. I will need to examine with my colleagues what represents the best use of our resources and how could we target our resources to those that need them the most,” he said.
Meanwhile, the Minister said that he expects Government will provide additional supports to help households with their energy bills this autumn.
“The budget is still a number of months away. But we have indicated as a Government that it is likely that there will be additional temporary one-off supports for our society.
“We know that energy costs remain really high. We have seen a dramatic reduction in the wholesale prices but we haven’t yet really seen the pass-through of that to households so come the autumn I think we will be in a better position to judge what is the level of inflation ... where our energy costs are going to be at that point in time.”
He indicated the Government would look at continuing reduced VAT rates, helping with retrofitting of houses and providing energy credits as possible options
“But I think we have also successfully targeted some supports through the social welfare system,” he added.
“Through the fuel allowance scheme for example, significantly extending the eligibility for the fuel allowance payment. And also providing some large once-off payments to help people who do qualify for that support.
“It is a judgment we will come to in the autumn, but I do think that it is likely as a Government that we will be providing additional energy support. Certainly through the autumn period for households.”
