Mortgage cut on cards as Fianna Fail to force through law
UP to 300,000 hard-pressed families are in line for a cut in mortgage payments
Families struggling with exorbitant variable mortgage rates are facing the prospect of a reprieve after Fianna Fáil snubbed Government attempts to water down the first major bill of the new Dáil term.
TDs will tonight pass legislation that aims to give the Central Bank new powers to tackle high interest rates, in a move that will provide hope for 300,000 customers.
The Fianna Fáil bill has been re-introduced in response to a complete failure by many of the main lenders to pass on lower interest rates set by the European Central Bank (ECB).
The move has also heaped huge pressure on Finance Minister Michael Noonan, who has been strongly criticised for failing to take a tougher line with banks in the past.
But in heated exchanges in the Dáil last night, Mr Noonan claimed that the introduction of the bill had caused a 10pc fall in bank shares.
Fianna Fáil's finance spokesperson Michael McGrath rejected the claims and accused Mr Noonan of "scaremongering".
"Go back and check the date, Mr Noonan replied. I hope they will recover."
Nonetheless, the bill is set to be passed tonight after Sinn Féin and the Labour Party pledged their support.
Although some banks have cut variable rates in recent days, Fianna Fáil believes its bill will put further pressure on banks to cut "excessive" rates.
Under the legislation, the Central Bank would be given the power to impose caps if such a move is deemed necessary.
The regulatory body would be first required to carry out an assessment of the mortgage market before determining whether banks should be forced to reduce rates charged to customers.
The Government yesterday immediately sought to warn of the dangers associated with the bill, which was described as being "unconstitutional" by Mr Noonan.
The Fine Gael politician said the measures would require EU approval before being implemented and that the Central Bank is opposed to being given such powers.
Mr Noonan said that while the Government is committed to reducing rates, providing for greater competition in the market is the best way forward.
"It is widely agreed that competition is the best way to reduce rates and ensure that we have a sustainable and viable mortgage market and that the heavy hand of regulation may not be the best way to engender competition," the Limerick TD said.
"There are also some signals that new entrants are looking to enter the Irish market.
"This level of competition will put further downward pressure on interest rates," he added.
A Government spokesman said the Government is to seek an amendment to submit the bill to pre-legislative scrutiny - which would result in a delay of six months.
He said "we all want the same thing" but argued that Fianna Fáil's solution to the problem, as outlined in the bill, is "not optimal".
But Fianna Fáil rejected the criticism of its proposals, which the party insisted will bring the prospect of reduced rates a step closer.
Mr McGrath also described the claim that the measures may be unconstitutional as "bogus".
"I find it bizarre that Minister Noonan would refer to constitutional issues because this very bill was debated in the Dáil last July and the Government responded to the bill then and raised no constitutional concerns," Mr McGrath said.
If passed, the measures will then be considered by an Oireachtas Committee, with Fianna Fáil hoping they will be introduced into law in about six months.
Mortgage expert Brendan Burgess of Askaboutmoney.com, said banks' "stubbornness" is to blame for the legislation.
"The banks have had plenty of time to bring their mortgage rates down towards Eurozone levels but they have refused."
Mortgage row: How it has unfolded
September 2014: Fianna Fáil finance spokesperson Michael McGrath calls on the European Central Bank (ECB) to force banks here to stop charging "rip-off" interest rates.
The call came following a series of articles led by the Irish Independent's Personal Finance Editor Charlie Weston which revealed how rates in Ireland were the highest in Europe.
April 2015: Fianna Fáil tables a private members' motion in the Dáil demanding the Government and Central Bank engage more robustly with lenders.
But Fine Gael and Michael Noonan rejected the bill and it was voted down.
June 2015: A similar bill tabled by Sinn Féin's Pearse Doherty was also voted down in the Dáil.
May 2015: Mr Noonan warns of repercussions for banks - but no action is taken.
May 2016: AIB said it was reducing its variable rate for the fourth time in July.
Fianna Fáil tables private members bill giving new powers to the Central Bank to regulate mortgage rates.
September 2016: Assuming the bill is passed, it will then be referred to the finance committee for consideration and amendments.
After this process, the measures will go before the Dáil and Seanad for report and final stage.
January 2017: It is envisaged the measures will come into law.