New variable rate mortgage rules dismissed as 'pointless'
Published 22/07/2016 | 02:30
Changes to the rules setting out how mortgage lenders treat those with variable rates have been dismissed as a waste of time.
The Central Bank is to force banks to tell variable mortgage customers each year that they could save money by switching.
And banks will have to explain to people with the expensive variables how they set the interest rates.
But consumer advocate Brendan Burgess said the changes were pointless.
Variable rates here are typically 2pc higher than those charged in other Eurozone countries, and a multiple of tracker rates. Variable rates are so much more expensive than trackers it takes a family almost three months to earn enough to meet the extra cost.
The premium imposed on variable mortgage holders is so high that a family will need to earn an extra €12,500 a year just to cover the difference, calculations by the Irish Brokers Association have shown.
Some 300,000 homeowners are on variable rates.
The new rules, which are being introduced by the Central Bank on February 1 next, mean banks must inform customers if they are on a higher interest rate than other products on offer by the same bank.
But the changes to the Central Bank's Consumer Protection Code will not put any pressure on banks to cut their variable rates. Mr Burgess said of the changes: "They are a complete waste of time and just a pretence that the Central Bank is doing something about mortgage rates."
He said the "pointless regulations" would actually be counter-productive for customers.
"This pushes up the cost of banking and these costs will be paid for by the borrowers," he said. The changes will apply to banks and to vulture funds.
Central Bank director of Consumer Protection Bernard Sheridan denied the new rules were a weak response to what is mortgage overcharging by banks.
"I don't agree it is feeble. We feel it will help if more information is provided," he said.
Asked if banks were calling the shots, Mr Sheridan said: "No, they are not. What we have ended up delivering is something we believe will help."