Noonan to haul in biggest banks in effort to slash variable rates
Finance Minister Michael Noonan is to haul in the six major lenders in the Irish marketplace, including Bank of Ireland and AIB, and ask them to reduce their mortgage interest rates.
Mr Noonan yesterday said he is awaiting a report from Central Bank Governor Patrick Honohan which should give him a cost analysis of how the banks could reduce their variable rates.
Government sources confirmed Mr Noonan will refer to his approach to dealing with the banks during the Economic Spring Statement today.
"We are anxious that the first reductions in variable rates will be announced before the summer recess," said a source.
Speaking yesterday, Mr Noonan said he is to put "additional options on the table" to try to help those still in severe mortgage debt.
It is believed that the Government's strategy to deal with the arrears crisis will be discussed further by the Economic Management Council (EMC) today. Among the measures being planned is a weakening of the banks' veto over deals with distressed borrowers and the setting up of a watchdog tasked with reviewing deals that fail.
Meanwhile, Mr Noonan yesterday described as "very welcome" an initiative announced by Ulster Bank to write to 2,000 people in arrears telling them if they sell their homes they will not be pursued for the outstanding debt.
This will apply to customers who are on low incomes and eligible for social housing.
"I thought it was a very interesting, and from (the Government's) point of view, a very welcome initiative.
"We are working at present on adding to the menu of options for the banks and their relationships with people with impaired mortgages," Mr Noonan said.
"110,000 mortgages have been reconstructed using the menu of options that is there now, and they have been satisfactorily reconstructed, but we know now that as you come down to the very difficult cases at the end, other options are necessary. I welcome this initiative from Ulster Bank, it's another option and I hope it will work," he added.
"In the next couple of weeks, the Government, after consultation with the banks, will be putting additional options on the table to deal with the residue of the most difficult cases, which haven't been resolved already," he said, speaking in Limerick.
He added: "I have had consultations with the Governor of the Central Bank, and he has done a piece of analysis to show the margin, between the cost of money and what they are getting for money when they lend it for mortgages, and he has that for me in the next 10 days or so.
"I'm calling in then, the senior management of the six major lenders in the market in Ireland, and I'll present them with the evidence from the Central Bank, and I'll say to them I think they should reduce their interest rates and that we want to discuss it, and I'll want them to explain why they can't, but we'd prefer it if they did.
"If you call that pressure, that's pressure, but I would see that as a discussion (with the banks) in the normal way. But I don't have legal authority to direct (the banks)," he added.
Fianna Fáil finance spokesperson Michael McGrath said the public are getting restless and want to see "action" in areas such as long-term arrears.