Central Bank action plan to ignore high variable rates
Published 03/02/2016 | 02:30
The Central Bank has set out its priorities for consumer protection this year, but has no plans to take any action to force banks to lower their variable mortgage rates.
The director of consumer protection at the bank, Bernard Sheridan, denied the organisation was abdicating its responsibility to people who feel overcharged on variable rates.
He said the Central Bank is currently carrying out a consultation process on forcing banks to give mortgage holders 90 days' notice when they plan to raise rates.
This would give people who are in positive equity the option to switch to another lender.
But there were no plans to take measures to force banks to lower their rates.
Some 370,000 mortgage holders are on variable rates, with regular claims made by financial experts and politicians that they are being ripped off as these are among the highest mortgage rates in the eurozone.
Variable-rate customers are paying €2,200 more a year for their mortgages than the equivalent in the rest of the eurozone. This is because the average variable mortgage rate is almost 2pc higher here than the average in the euro currency area.
Mr Sheridan denied the Central Bank is ignoring the over-charging of variable mortgage holders.
"I don't think we are abdicating our responsibility on this one. There are issues around [banking] competition and we are not ignoring that fact.
"We are doing what we can within our remit," he said.
The Central Bank is actively trying to encourage mortgage holders to switch to another lender to get a better rate, he said.
Setting out consumer protection priorities for this year, the regulator may curb certain types of commission earned on the sale of financial products such as life assurance and mortgages later this year.
The Central Bank plans to issue a discussion document exploring if commissions paid to brokers mean consumers are being encouraged to take out inferior products.
The use of percentage-based commissions, where a large commission is paid to a broker for a larger sale, will be questioned.
It intends to probe health insurers to make sure they are recommending the most appropriate plan when customers come to renew their policy.
Site visits to health insurers have raised issues about whether people were getting proper advice on which plan they were paying for, Mr Sheridan said. Central Bank rules require firms to know their customers, identify their needs and recommend appropriate products.
Mr Sheridan said there were large numbers of health insurance products and there were questions around whether consumers were being given appropriate advice, and renewed on the correct health plan.
An industry-wide probe of banks with tracker mortgages will require them to check their own mortgage books, but there will be Central Bank oversight, he said.