Mortgage group planning to fight in General Election
Repayment 'strike' among ideas to force banks into variable rate cuts
Published 06/05/2015 | 02:30
A mortgage strike and putting up candidates for election are among the ideas being considered by a new group set up to fight for lower standard variable mortgage rates.
The group, which is planning a mass meeting in Dublin this week, is also looking at a call for consumers to boycott ancillary bank produces such as credit cards and insurance.
The group is being pulled together by consumer advocate Brendan Burgess. It has arranged a mass meeting for tomorrow night in Dublin.
Mr Burgess said the idea of a large-scale mortgage strike would be discussed, but he regards it as a bad idea as those refusing to pay would damage their credit ratings.
He said the indications were that there would be strong interest in running candidates in the forthcoming General Election, seeking a mandate to have variable rates lowered.
"There are a lot of people out there affected by high variable rates. Some 300,000 people have them and if you include their spouses there could be around 500,000 people. That is a lot of votes."
He said Tánaiste Joan Burton's idea to double the levy on banks unless they cut variable rates was also up for discussion, but his view was that this would backfire.
He suggested getting rid of the levy on banks if they commit to reducing variable rates. The levy costs the banks around €150m a year.
Also being examined is taking a High Court challenge to lenders' rights to increase variable rates without reference to the European Central Bank rate. The ECB rate is close to zero, but variable rates are 86 times higher.
Those attending the meeting, in Dublin's Ballsbridge Hotel at 7.30pm tomorrow will be urged to engage in a mass campaign of mortgage switching to force banks to cut punitive variable rates.
The move to get 80,000 people to switch represents a dramatic escalation in the campaign to push banks to treat those on variable rates fairly.
If enough people do this, banks will be left with no option but to implement sharp reductions in the sky-high variable rates, Mr Burgess said.
Threatening to switch may be enough to get Bank of Ireland to lower your rates, he said.
Last week, AIB said it was cutting its variable rate, which will also include its subsidiaries EBS and Haven.
Mr Burgess said that even with the AIB cut, its variable rate customers would still be paying €300 a month - or €3,400 a year - more than they should be paying.
He said this was because the new AIB variable rate of 3.9pc is still close to double the average rate in the eurozone.
However, Central Bank Governor Patrick Honohan has said the Central Bank is doing research on elements of mortgage rate pricing, and on the role of competition on influencing pricing.
He also suggested that any attempt to force banks to cut rates could discourage new market entrants.
"We don't have enough competition in the banking system now. I think we will have more competition in the future. These are long-term contracts.
"I think it's more important for now and in the future to have the overall regime right and not having somebody poking around and saying do this and do that.
"You may end up in a situation where you will have driven away the potential competitors and will be left with progressively high cost and poor services for customers."
Goodbody Stockbrokers analyst Eamonn Hughes has estimated that variable rates are 3pc above the average cost of funds for banks here.