Charlie McConalogue (Donegal North East, Fianna Fail) | Oireachtas source

I support the Central Bank (Variable Rate Mortgages) Bill put forward by Deputy Michael McGrath. It is a proportionate and considered response to a real failure in the marketplace and our banking system, particularly with regard to its treatment of customers with variable rate mortgages.

It is disappointing that the Minister, Deputy Noonan, indicated in his comments today that he would drop this issue and not pursue it any further. It is reminiscent of his position before he started to engage on this and recognised that it was an issue that had to be addressed. That only happened after Deputy McGrath and the Fianna Fáil Party tabled a Private Members' motion last April raising this issue and making the extent of the problem crystal clear. Due to the widespread support the motion received and the coverage it garnered, the Minister had little option but to realise and admit that there was a problem and belatedly engage with the banks. We have seen the unravelling of that process over the last couple of months and the Minister's various engagements with the banks but, unfortunately, as our party leader said on Leaders' Questions last week, the banks have pretty much told the Minister to take a hike on the issue. They have paid lip service to the problem raised with them, but their response has been exceptionally limited and, in the vast majority of cases, totally unacceptable.

As Deputy McGrath outlined earlier, the response of some of the banks has been that they will only agree to offer reduced rates in respect of fixed rate mortgages for customers. Unfortunately, that is not acceptable or suitable for many customers. It prevents them from moving on or changing bank. It also prevents them from being able to avail of newer rates which might become available in the future. The other difficulty is that under many fixed rate agreements between customers and a bank, the customer is prevented from making additional payments on his or her mortgage when funds become available. Indeed, the customer can incur penalties upon reducing his or her mortgage by a greater amount, should unexpected funds become available.

The Bill is very sensible, if people would take the time to read it. It is proportionate and considered in the way it addresses the problem. It provides for a requirement for the Central Bank to carry out an assessment of competition in the banking market on a quarterly basis. None of us should fear that. With regard to the powers given to the Central Bank on foot of the problems it identifies, again, the Bill is proportionate. It gives a great deal of power and responsibility to the Central Bank to reach judgments about what is reasonable in respect of rates being charged in the market. The current situation with banks in this country is that the average variable mortgage rate is 2% higher than the rate in other countries in Europe.

No one can argue that this is not a difficulty or that customers are not being short-changed or used by the banks and the Government, through its failure to engage with and address this problem, to recapitalise the banks. Those with mortgages, especially large mortgages, are the most hard-pressed people in the country and are least amenable to being used by the Government as a means of recapitalising the banks.

The Bill also addresses the problem of the non-banking institutions that hold approximately 47,000 mortgages and are not restricted in respect of the mortgage rates they can charge on the loans they hold, many of which were purchased from banks. The legislation proposes to ensure that these institutions are subject to reasonable competition constraints and a requirement to protect customers.

I urge the Government to reconsider its opposition to the Bill. This is its final opportunity to address this issue properly. It must not walk away from the issue or brush it under the carpet, as is its wont with such issues. It should instead deliver some relief to some of those who most need it.

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