Wednesday 16 January 2019

FF seeks mortgage rate cap as part of stability agreement

(Stock photo)
(Stock photo)
Michael McGrath. Picture: Tom Burke
Kevin Doyle

Kevin Doyle

Fianna Fáil representatives met with Central Bank officials to discuss ways to tighten rules for variable mortgage interest rates, as part of a new Confidence and Supply deal with Fine Gael.

The party is now demanding new laws to limit hikes to variable mortgage rates be introduced in return for propping up Taoiseach Leo Varadkar's Government.

The issue is one of a small number of priorities that the party has chosen to hang its hat on in return for agreeing a Confidence and Supply agreement with Fine Gael for helping it stay in power until the summer of 2020.

The Irish Independent has learned Fianna Fáil representatives discussed ways of tightening the rules around how much interest homebuyers can be charged when they met with Central Bank officials in recent weeks.

Irish mortgage holders are paying the highest interest rates in Europe, at around 3.2pc in comparison to an average of 1.8pc across Europe.

The issue itself is nothing new for Fianna Fáil - the party brought forward legislation on the issue in 2016, but it wasn't progressed as the Attorney General advised it could be unconstitutional. The bill sought to give the Central Bank the power to force banks to cut standard variable rates.

However, the Central Bank previously said that interest rates are "subject to existing contracts and contract law". It also said it was concerned about the Central Bank's statutory functions to "encompass the regulation of competition".

The European Central Bank president Mario Draghi has also warned that the introduction of the measures could result in banks increasing prices on other products.

Fianna Fáil has privately accepted it would be "virtually impossible" to proceed with its original bill - but is now set to push for an alternative approach, following the agreement of an extension to the Confidence and Supply deal.

It is understood the Central Bank may be more open to new rules if the Dáil defines the actual cap on mortgage rates or clearly set out a methodology under which a cap could be deciphered.

A revised bill will also seek to clampdown on cash back offers which some banks use to attract first-time buyers on the grounds that such deals camouflage higher rates.

Fianna Fáil's finance spokesman Michael McGrath confirmed to the Irish Independent that tackling mortgages is a key priority for the party in the year ahead.

Mr McGrath said he has "yet to hear a credible reason" for why banks operating in Ireland charge so much more than their counterparts in Europe. "It's an issue we'll now be revisiting in light of extension to Confidence and Supply agreement. We want to get legislation in place that helps to reduce mortgage rates," he said.

The other two issues that Fianna Fáil wants to see addressed are stronger legislation in the areas of digital safety and bail laws.

Meanwhile, Fianna Fáil leader Micheál Martin has denied that his party got a raw deal for its support of the Government. "The bottom line is we're facing into a huge threat in the form of Brexit," he said.

Asked about criticism from his party colleague John McGuinness, who dubbed the deal a 'cowardice and surrender agreement', Mr Martin said: "I respect his opinion."

Irish Independent

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