Sunday 23 October 2016

Editorial: People power is only answer to the banks

Published 02/05/2015 | 02:30

If people want better deals, then they have to fight for them
If people want better deals, then they have to fight for them

The issue surrounding punitive rates of interest charged to holders of standard variable-rate mortgages is not going to go away, much as the Government and the major banks might wish it would.

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The Coalition seems at odds on the issue - the Taoiseach is urging the banks to do something about it, while the Tánaiste threatens some sort of action, such as a bank levy, in an attempt to force the banks to reduce their rates.

While the AIB group has bowed to pressure, the other major mortgage lenders do not appear to be amenable. It would seem that the Government is not in a position to force the issue much further. An increase in the bank levy would have to be extended to all banks - including the AIB group, which has cut its rates - which would be unworkable.

Those lenders which are defying the Government are adamant that they need the high rates because, effectively, they are losing money on trackers and mortgage defaulters. They also argue that holders of standard variable-rate mortgages signed up knowing the rules.

Experts do not believe that other mortgage providers will lower their rates in response. However, there is another way customers can attempt to cut their bills, or force the reluctant banks to change their policy. This is by people deciding to switch to financial institutions offering more favourable rates. It is estimated that a switch could save a mortgage holder €300 a year over the 25 years of a €200,000 mortgage. This is a considerable sum and if enough customers were to harness people power, it is possible the financial institutions would have to bow to pressure and change their position and reduce variable rates.

The mortgage issue is here to stay, as house sales are increasing and new figures show that 2,252 people were approved for mortgages in March, a 44pc increase on the same month last year.

Many people are reluctant to switch, mostly because they can't be bothered with the paperwork involved. But if people want better deals, then they have to fight for them.

Banks don't like to lose paying customers and now that profitability has returned to the sector, good customers are in a much stronger position.


Patrick Honohan did the State some service

The outgoing governor of the Central Bank has, during his term of office, done the State some service.

When politicians were telling us that Ireland did not need a bailout, Patrick Honohan, fresh from a meeting of the European Central Bank (ECB), went on RTÉ's 'Morning Ireland' to tell the Irish people the reality of where the country was at that perilous moment in time. He has also, commendably, taken a "personal decision" to take a voluntary pay cut and forgo over €500,000 of his salary during his term as head of the Central Bank.

Our thoughts now turn to Mr Honohan's successor, who must - like him - be rigorously independent and tell the Irish people where we stand and what needs to be done, so as not to repeat the mistakes of the past. We do not want a 'yes' person or a well-regarded mandarin to replace him, but someone who will pursue a policy of independence and clarity of thought.

Economic policy may be largely dictated from Frankfurt by the ECB, but our Central Bank governor still has a major role to play in formulating the State's finances for the foreseeable future.

Irish Independent

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