Saturday 17 November 2018

It's time to shout 'stop' on excessive charges

(Stock photo)
(Stock photo)

Brendan Burgess

If you are one of the 300,000 non-tracker mortgage holders who is paying around €150 to €200 a month in excessive interest rates, you won't get much comfort from reading the report on mortgage rates published yesterday by the Competition and Consumer Protection Commission (CCPC).

In fact, you will get very annoyed reading it. You will see that new borrowers in Finland, another member of the eurozone with a mortgage market around the same size as Ireland's, are paying 1.09pc for their mortgages compared to the 3.5pc here.

You will see Irish mortgage rates are not just a bit above average - they are by far the highest in the eurozone.

And it's not because the costs of funds are high in Ireland. Irish banks pay lower deposit rates than the average eurozone banks.

You will be annoyed when you realise the National Consumer Agency and its successor the CCPC have done nothing at all about this since Irish banks started pushing up their rates five years ago.

They never issued a statement on mortgage rates. They never asked why rates were so high. They never complained about the Irish mortgage lending cartel.

The CCPC is paid by the taxpayer to advocate on behalf on consumers but it has looked the other way.

And now, after you have paid around €15,000 in excess interest over the past five years, the CCPC comes out with a report that says we need more competition, a long-term strategy, a vision and we need more committees and inter-departmental working groups to discuss this strategy.

The report tells you there are no quick-fix solutions to high mortgage rates. But maybe a switching code might be developed which will make switching easier. Irish borrowers didn't need a switching code back in 2002 when a new lender came into the market offering lower rates. There was widespread switching and the existing lenders cut their rates to try to retain customers.

Irish borrowers don't switch now because all the lenders are charging high rates and there just isn't enough saving to be made.

The CCPC, the Government and the Central Bank tell us to be patient and that competition will bring down mortgage rates - eventually. Well the Government and the Central Bank have been telling us that for the last three years and there is no sign yet of any competition. Are borrowers to wait another three years before rates are reduced to a fair level?

The lenders have been on notice to stop gouging Irish families for well over two years. They have taken no heed. It's now essential that Michael McGrath's bill to limit mortgage rate gouging is pushed through the Dáil.

This bill would stop lenders discriminating against existing customers by charging them more than new customers as they would be forced to pass on rate cuts to new and existing customers. It would stop lenders using cashbacks and one-year discounts to trick customers into expensive mortgages.

It would allow existing customers who have reduced their Loan to Value to avail of the lower rates pertaining to that lower risk category. I believe less regulation is better than more regulation. I believe in a free market. But when an effective cartel of banks imposes excessive costs of around €150 per month each and every month on 300,000 Irish families and shows no sign of stopping, it's time to shout 'stop'.

Brendan Burgess is a spokesman for the Fair Mortgage Rates Campaign

Irish Independent

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