High time we stopped banks treating people like dirt
Published 05/07/2015 | 02:30
So competition is our best hope of stopping banks overcharging mortgage holders on variable rates.
That is the argument the Central Bank has been putting out, as it does not want powers to set rates.
And the argument is poppycock.
The actions of KBC Bank illustrate that clearly.
Just like Bank of Ireland, Ulster Bank and Permanent TSB, it is defying calls to cut variable rates.
Instead, the Belgium-owned bank is offering lower fixed rates to existing customers. Great, you might think.
But wait a minute. The existing lot are getting some reductions - but not quite the low rates for the newbies.
An existing variable rate customer at KBC could get their rate down to 3.9pc. That is a big improvement on 4.5pc, and could see a family on a €300,000 mortgage save €1,700 a year. To get that rate they will need to switch their current account to KBC.
But before customers get too carried away, it needs to be pointed out that a brand new customer can avail of an even lower rate at 3.30pc, fixed for a year.
This is discriminatory and unfair. People in negative equity cannot switch to another lender, so competition is not working for them.
Some 150,000 of those with a variable are in negative equity - they owe more than the property is worth.
The banks are also refusing to cut variable rates. They are allowing existing customers to avail of better fixed rates, but this is not enough.
AIB, which includes EBS and Haven, cut its variable rates twice but seems unlikely to cut again.
The banks have been leading Finance Minister Michael Noonan on a merry dance.
Many of the 300,000 people on variables are stuck at rates as high as 4.5pc. These are twice the eurozone average, and three percentage points higher than the best in the UK.
Mr Noonan previously said there will be penalties imposed if banks do not comply with cuts.
But the bar was set low as lenders were allowed to lower variable rates or fixed rates, or allow existing customers to benefit from lower fixed rates for new customers.
The threat was that the Central Bank would be given powers to cap rates.
What we need is laws banning existing customers being treated any differently to new ones. And it would do no harm to give our regulators powers to limit what can be charged.
And to hell with what the Central Bank thinks.
The market has failed, so it is time consumers were considered, and not just used as tools to restore bank profitability.
Sunday Indo Business