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McGrath urged to back new bill to cap high variable mortgage rates ahead of ECB hike

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Labour's Finance spokesperson Ged Nash

Labour's Finance spokesperson Ged Nash

Public Expenditure and Reform Minister Michael McGrath

Public Expenditure and Reform Minister Michael McGrath

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Labour's Finance spokesperson Ged Nash

Public Expenditure and Reform Minister Michael McGrath has been called on to support a bill to cap variable mortgage rates, similar to one he championed when he was in opposition.

The bill is set to be introduced in the Dáil today by Labour’s Ged Nash, and comes just weeks before the European Central Bank ( ECB) is set to launch a round of interest rate rises.

Some 200,000 mortgage holders in Ireland are on variable rates and are set to be hit with higher repayments when the ECB starts hiking its lending rate.

Variable mortgage rates in Ireland have been controversial because they are higher than in many other eurozone countries.

The legislation would give the Central Bank the power to force banks to cut their standard variable rates.

It would also give the regulator the ability to stop banks offering better mortgage deals to new customers than are available to existing customers.

The Central Bank (Variable Rate Mortgages) Bill 2022 would require the Central Bank to carry out an assessment of the state of competition in the mortgage market every quarter.

This would look at variable rates, how easy it is to switch lender, the cost of funds for lenders and what rates they charge.

If regulators decide there is a market failure, as a lender is charging too high a variable rate, it would be able to specify a rate to be charged.

The legislation would also ban lenders charging lower rates to new customers than existing ones, in a bid to get new business.

Mr Nash, who is Labour’s Finance spokesperson, said: “The series of European Central Bank interest rate rises starting from July will clobber almost half a million hard-pressed homeowners who are already at the sharp end of the cost-of-living crunch.

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“Ireland already has the second-highest mortgage interest rates in the EU, beaten only by Greece.

“This must change.”

He added that even at a time when the cost of funds for Irish lenders has been low, Irish consumers have been hammered with variable interest rates on home loans ranging between a high of 4.5pc and a low of 2.7pc.

“With interest rates set to climb, some analysts expect variable rate mortgage holders here to be paying anything up to €400 more a month, even on a relatively modest mortgage of €250,000.

“The reality is a young person or a couple buying their first home will be stretched beyond their limit with these hikes while young families with years left on their mortgages will face an unsustainable strain on their finances from rising rates.”

When Mr McGrath proposed similar legislation while his party Fianna Fáil was in opposition, the then attorney general advised that if the legislation was enacted, it could be open to a constitutional challenge.

Mr McGrath’s bill was also opposed by both the ECB and the Central Bank in Ireland.

A spokesman for Minister McGrath said he had no comment.

Consumer campaigner Brendan Burgess, who has long lobbied for lower variable rates, claimed Mr Nash’s bill will be suppressed as it will again be opposed by the ECB and the Central Bank.

He suggested replacing Mr Nash’s bill with a simple one banning discrimination between new and existing customers.


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