Government considering levies on banks that refuse to cut variable rates
Banks could face higher levies and taxes if they continue to refuse to cut variable mortgage rates, Tánaiste Joan Burton has warned.
Health Minister Leo Varadkar also strongly hinted the Government will have to act if the banks do not move to ease rates for an estimated 300,000 borrowers, whose repayments are among the highest in the eurozone.
But Labour leader Ms Burton went further and said the Government would also examine the option of increased taxes and levies if the banks refused to move on variable rates. "That is a possibility," Ms Burton said when asked whether the Government may increase the levy if the banks do not cut rates.
Mr Varadkar accused banks of treating people on variable-rate mortgages "very badly" and "shabbily".
He was speaking after it was reported the Coalition has warned the banks to reduce their variable rates or face levy hikes. If banks refuse to cut variable rates, the Government could hit them with "severe" hikes in levies.
However, Mr Varadkar insisted the Government was not going to interfere in the commercial decisions of banks, saying: "It would be a mistake to do that." He also said there "hasn't been an official decision or anything like that on the bank levy that I've been party to".
He said that in meetings the Government had made the point very strongly to the banking sector "that people on variable rates are being treated very badly and shabbily by banks, particularly by banks in profit".
Irish lenders have been reluctant to pass on European Central Bank rate cuts to their mortgage customers, with most banks only returning to profitability last year following the 2008 financial crisis.
The Central Bank's latest figures showed the average interest rate on a new, variable mortgage was 3.26pc at the end of January. That is compared with the equivalent eurozone rate of 2.3pc.
Voter anger has been steadily increasing over the variable mortgage rate as the parties prepare for the run-in to the General Election.
Taoiseach Enda Kenny has said he does not have the power to "fix rates", but made it clear the Government was "not happy with the banks".
The Government also plans to heap more pressure on lenders over their failure to do deals with homeowners in arrears.