Áine Collins (Cork North West, Fine Gael) | Oireachtas source

I welcome the opportunity to speak on this Bill. The area of variable interest rates is of concern to many mortgage holders, particularly those in distress. I refer to the part of the Bill which deals with trackers, many of which are costing the banks money, as we know. My view on all of this is that banking is a business, the same as every other business. In order to make it effective and competitive, we need more competition in the market; in order to do that, we need more banks to open in Ireland; and in order to do that, we need to be an attractive place for banks to come to do business. I hope that we see that take place in the coming months. Perhaps some European banks will come here and offer people an alternative, and allow them to change their existing mortgages to another bank. At that stage, they would be able to get the mortgage at a different rate.

My personal belief is that this is not something we should interfere in, as policy makers, and we should let the market dictate this. I know the Central Bank has looked into this and the Minister for Finance has spoken to many of the banks, which are due to report back before the end of July to give their views on what they will do on variable rates. That is an important process which we should let come to fruition before we suggest enforcing a particular rate and deciding how banks should operate. I do not believe that would be good for commercial business, for households or for first-time buyers. It would create a completely different animal and, while it might solve one problem, it might create many others.

Competition between banks is crucial, as is ensuring that the price customers have to pay moves in the right direction. We saw this worked previously in a different climate in Ireland, when interest rates were much lower. Back in the late 1990s and early 2000s, a person taking on a loan always paid arrangement fees and so on, but we got rid of all of those fees. We reached the stage where one wondered how banks could even operate and make a profit but we are now back to different conditions in business. Interest rates must be paid and loans must make sense, in the same way that deposits must be attractive for people to put money into the bank. Therefore, the way banks operate must go back to the normal way it was before what we would call the Celtic tiger, when interest rates were extraordinarily low and, as I said, one would wonder how the banks operated given the low fees.

That is my view. We should wait until the banks report to the Minister in July on what model they would like to use. At that stage, we will be able to see more clearly. I believe we need more competition in banking in Ireland. We should be out there looking for other banks, European banks in particular, to come to Ireland to set up, as this would solve many of these problems. This would be good for business given credit is an issue for small business in particular, although it is an issue for big business as well. We need more competition in the market to achieve this. There was a time when credit was free-flowing but, given the crisis, we have gone to the other extreme. We need to get back to normal conditions. There has to be an element of risk when a business borrows money, which is an important point, and we need a certain amount of competition in the market.

The Central Bank is very clear that regulating interest rates would have a negative effect on banking efficiency and hinder the entry of other banks into the Irish market. It was asked if we wanted the power to regulate rates. Future competition is a better way of creating a sustainable long-term solution. As I said, the Minister has spoken to the six main mortgage lenders in the last month and they are due to report by the end of July. We should wait for that process to conclude and then look at this again. My firm belief is that the Bill would not be good for business in the long term. We should let the market dictate this and the best way to do that is to have more competition in the market.

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