FG accused of bowing to banks on mortgages
FF says Noonan ‘bought off’
Finance Minister Michael Noonan has been accused of ignoring the plight of 300,000 mortgage customers after it emerged that Fine Gael has rowed back on plans to force banks to slash variable rates.
The high rates being charged by lenders have surfaced as a significant election issue after the Fine Gael manifesto made no commitments to pressurise banks into passing on reductions in interest rates.
Irish customers still pay up to 2pc higher than the European average in what has been labelled a "scandal" by the Opposition and financial experts.
But months after warning of tough sanctions against banks, Mr Noonan now says increased competition, and the establishment of a code of conduct for switching providers, are the best ways to bring down rates.
"We believe increased competition from outside and within the banking sector is the best way to drive down standard variable rates," the Fine Gael manifesto states.
It adds: "We will establish a code of conduct for switching mortgage provider, administered by the Central Bank, which should inform and encourage mortgage holders to switch to more competitive banks."
The manifesto also proposes the establishment of a "standardised and dedicated switching form, which will be simple to use and quick to administer."
But the measures will come as little comfort for hard-pressed variable mortgage customers.
Fianna Fáil has pledged to introduce legislation which will empower the Central Bank to force lenders to slash rates.
The legislation will allow a cap to be placed on the variable rate and will provide for sanctions if banks fail to comply with Central Bank orders.
"I think having legislation on the statute books, which provides for a cap on interest rates, will put manners on the banks, quite frankly," said the party's finance spokesperson Michael McGrath.
Mortgage interest relief will also be extended until 2020 under the Fianna Fáil plan.
The party is also pledging measures to assist first-time buyers caught in the "vicious circle" of not being able to save for a deposit because of high rents.
The measures would see the Central Bank reducing the deposit requirements for those who can demonstrate a three-year track record of paying rent.
But on the issue of variable rates, Mr McGrath accused Mr Noonan of capitulating to the pillar banks.
"The Government has failed miserably to deal with this issue. Michael Noonan has huffed and puffed. He has met with the banks but he has been bought off very easily indeed," he said.
"He was bought off too easily and, in my view, he failed to stand behind mortgage holders.
"He failed to defend their rights and he failed to stop the rip-off of variable rates in this country," Mr McGrath said, in reference to a series of meetings between Mr Noonan and the banks over the issue late last year.
Speaking at the launch of the Fine Gael manifesto in Dublin this week, Mr Noonan accused Fianna Fáil of going down a "dangerous path" and trying to interfere with interest rates.
The minister said it was essential that the independence of the Central Bank be respected.
However, Mr McGrath rejected the charges.
"The Central Bank is independent but it is also working within the statutory framework laid out by the Oireachtas," he said.
Mr McGrath said he was not in favour of introducing any additional bank levy for fear that it would be simply passed on to customers, explaining: "I think you are exposing mortgage holders to a further risk if you increase the levy banks have to pay and that's not a route I want to go down."