Mortgage rate issue has taken off - now we need action
This was the week when the plight of around 300,000 standard variable rate mortgage customers finally got the attention it deserves.
For too long, they have been the forgotten group of mortgage holders.
They have looked on with envy as their neighbours and friends on tracker mortgages have benefited from the ECB rate falling to a historic low of 0.05pc, while they have continued to pay way over the odds on their variable mortgage.
Despite sustained efforts before now on the part of many including myself, Charlie Weston, Personal Finance Editor of the Irish Independent, and Brendan Burgess of askaboutmoney.com, to highlight the discrimination against variable rate customers, the issue never really took off.
It did this week. Fianna Fáil used our private members' motion this week to put the spotlight firmly on the issue. It was debated in the Dáil on Tuesday and Wednesday evening. Not a single Government TD spoke against the motion, yet the Government still voted it down.
The Government amendment bizarrely called on itself to act on the issue. Party politics wouldn't allow them to accept the Fianna Fáil motion.
On Wednesday morning during Dáil questions to the Minister for Finance, Michael Noonan told me he would take up the issue with the Central Bank governor Patrick Honohan to see what influence could be brought to bear on the banks to cut rates.
By Wednesday night, the minister said the meeting would happen the following day. The Government could see the campaign was gaining momentum.
This newspaper led with the story three days in a row. A number of TV and radio programmes also covered the story.
Hundreds of individual variable mortgage holders were contacting TDs to tell their story of how high variable rates were crucifying them.
The meeting on Thursday between the minister and the governor was a step forward. Now, we need action to be taken.
There is a deep injustice at the heart of this issue. The nature of a 'variable' rate mortgage is that the rate should vary in line with market conditions.
This hasn't happened. Variable rate customers are typically paying 4-4.5pc on their mortgage.
The rates on sub-prime and buy-to-let loans are higher again.
The average rate in the euro area on new home loans is 2.3pc. The cost of funds for the banks in Ireland has fallen to between 1pc and 2pc.
Many variable rate customers are paying hundreds of euro extra each month because of excessive rates.
In simple terms, a 1pc difference in the interest rate on a €200,000 mortgage means an additional interest bill of €2,000 in a year.
People paying the marginal rate of tax need to earn €4,000 to come up with that money.
This issue is not going away. The banks need to reduce their variable rates significantly, and end the rip-off of variable rate mortgage customers.
I and my colleagues in Fianna Fáil will continue to press this issue until the discrimination against variable rate customers is brought to an end.
* Michael McGrath is the Fianna Fáil spokesperson on finance and a TD for Cork South Central