Irish MEPs lobby Draghi to probe our sky-high loan rates
Published 29/04/2016 | 02:30
All the Irish MEPs have signed a letter calling on European Central Bank's boss Mario Draghi to conduct an investigation into high variable mortgage rates in this country.
The 11 MEPs told the ECB that variable customers were being overcharged.
Mr Draghi was asked to investigate why the banks in this country had not passed on cuts to the main ECB financing rate.
The ECB rate is zero, but banks here charge an average of 4pc to the around 300,000 people on variable rates.
The letter quotes Central Bank figures. "The average standard variable mortgage rate in Ireland is 3.6pc . . . Some banks still charge over 4pc for a standard variable mortgage product. This is despite the fact that the ECB's main refinancing rates for banks is now 0pc." It said average variable mortgage rate in the eurozone was 2pc.
"This demonstrates that Irish banks are overcharging their customers significantly compared to other European banks and are not accurately reflecting the refinancing rate that the ECB has set."
But the MEPs said banks were passing on ECB rate cuts when it came to the interest they pay savers.
Among those who signed the letter were Fine Gael's Mairead McGuinness and Brian Hayes. He said: "We need the ECB to look at this issue as Irish banks do not seem to be passing on the current low interest rates which the ECB has set."
The move by the MEPs to write to Mr Draghi was understood to have been prompted by the Consumers' Association calling for action from the European Parliament on the issue.
In the letter, the MEPs point out that only six main players operate in the Irish banking market, all of whom charge similarly high rates for variable mortgages and offer similarly low deposit saving rates.
Central Bank governor Philip Lane this week dismissed calls for a limit on mortgage rates arguing that any legislation to curtail interest rates could deter potential market entrants.
"If you set a legislative ceiling on rates, what you're going to see is of course a deterrent to entry. If you set a ceiling where it is unattractive to entrants to come in, that's going to solidify any existing lack of competition," he said.
Meanwhile, a report form ratings agency Standards & Poor's said the number of homeowners who are more than two years in arrears on their mortgages has fallen to a four-year low.
But it warned that the scars of the housing and economic collapse will be evident for a number of years in the mortgage market.
Some 13pc of the value of mortgages are more than two years in arrears. However, it said these severe arrears account for 80pc of total arrears.
"Very long-term arrears of greater than 720 days are growing in both size and severity, as the direct result of elevated levels of long-term unemployment, long foreclosure processes, and the Central Bank of Ireland's forbearance measures," said credit analyst Arnaud Checconi.
S&P said arrears should continue falling moderately.
Mr Checconi added: "We also believe that if the downward trend is to continue, Irish mortgage lenders will need to address the issue of very long-term arrears, and the Irish government that of long-term unemployment."