The much-promised law that will give the Central Bank the power to cap mortgage interest rates will harm financial stability and bank competition, the European Commission has said.
Objections to the mortgage rate cap law have already come from the European Central Bank, despite the fact that such caps are common across Europe, and the International Monetary Fund.
The bill is currently going through pre-legislation scrutiny by an Oireachtas Committee because of the fears it could contravene the Constitution, and is unlikely to be enacted until later in the year at the earliest.
The latest post programme monitoring visit by the European Commission ended yesterday, with concerns raised about the impact of the proposed law if brought in.
“Concerns remain that the draft bill enabling the Central Bank of Ireland (CBI) to cap interest rates on variable rate mortgages, if enacted, could have negative implications for the transmission of monetary policy, financial stability and bank competition,” the Commission said in a statement.
Variable mortgage rates here are almost twice those charged in the rest of the Eurozone.
Meanwhile, the Commission has also warned that residential property prices need to be closely monitored.
More generally it said that while the outlook for the Irish economy remains bright, external risks are significant.