Banks face sanctions in Budget over variable mortgage rates
Published 29/09/2015 | 02:30
Sanctions for banks that consistently refuse to slash variable rates for mortgage customers are on the table ahead of next month's Budget.
However, there has been a marked change of tone among Coalition figures in recent weeks over whether to hike the current bank levy as a means of punishing lenders.
Moves to increase the €150m bank levy were discussed at the highest level of Government towards the end of the last Dáil term.
But ministers are now stressing the fact that banks are putting forward a number of "options" for variable rate customers as a means of reducing their monthly payments.
Finance Minister Michael Noonan said last week that it is up to borrowers to change mortgage provider if they are not satisfied with the options being offered.
And he said he believes increased competition in the market in the future will provide the best incentive for banks to slash variable rates.
Nonetheless, Tánaiste Joan Burton yesterday said an increase in the levy remains "under examination" ahead of the Budget on October 13.
"I certainly think that when you look at the variable interest rates and you compare them to the rates at which banks are borrowing, there's an enormous margin there.
"I certainly think it's possible to give people who are on variable rate mortgages, in a number of cases, a much better deal," Ms Burton said.
Ms Burton also criticised banks for failing to do enough to promote the options available for customers.
"I know a quite a few of the banks have moved now to a range of deals where, for a number of years, you can get, if you like, a variable rate mortgage with better rates. I think that's given an option to a number of people, I don't think it's very well known," the Labour Party leader added.
Last night, Department of Finances sources confirmed that penalties for banks that refuse to slash variable rates will be considered as part of the Budget.
The same sources, however, pointed out that there is concern that some customers appear reluctant to switch provider.
Meanwhile, Mr Noonan has refused to be drawn on specific measures to tackle spiralling rental costs in Ireland, insisting the proposals on controlling the rental market are still at senior civil servant level.
It's been revealed that landlords risk fines of up to €15,000 if they refuse to take tenants who claim rent allowance, under new legislation due to come into effect in coming weeks. There are also plans to tie rent to inflation over a four-year period.
Environment Minister Alan Kelly is determined to agree a rent strategy by the Budget next month. However, when asked about proposals to regulate the rental market, Mr Noonan said no decisions have been made.
"There are no decisions made, various ideas are being kicked around and there are very solid proposals coming in from the (Department of) Environment. The Department of Finance have put up some proposals as well, but it's at the level of senior civil servants, it hasn't come back to the ministerial side yet."
According to Mr Noonan, a Cabinet sub-committee chaired by Mr Kelly is considering a series of issues around the subject of rent.
"As we move from recession into periods of very strong growth, the problems facing the economy and the country are problems of success rather than failure, and the big problem of success is on the horizon now as a result of all the new people that are getting jobs, especially in the cities, is housing, whether it's rental or purchase of housing. This is emerging as a very big problem," he said.
"There's a sub committee of cabinet under Minister Alan Kelly's department which is looking at a series of issues now in advance of the Budget."
These include "the issue of rent and how one marries rent with house purchase - and where the issues interlock and interchange - but there are no decisions taken yet", he added.