Ciarán Cannon (Galway East, Fine Gael) | Oireachtas source

I thank Deputy Michael McGrath for proposing the Bill on an important issue affecting thousands of families. It is an issue our Government has been proactive in addressing. An Taoiseach and the Minster for Finance, Deputy Michael Noonan, have already acknowledged that the variable interest rates being charged by some of our banks are punitive and significantly higher than those being applied across the rest of the eurozone. In bringing our country from the depths of economic recession to the point where we are now firmly on the road to recovery, those very same banks relied completely on the support of our taxpayers to remain in business. However, there seems to be an unwillingness on the part of the banks to acknowledge that solidarity is a two-way street and that the support of our hard-pressed taxpayers needs now to be reciprocated at a time when many of them are struggling to pay their mortgages. Nobody is suggesting for a moment that our banks need to reduce interest rates to the point where their very financial viability is threatened, but with profits last year running into millions, there is very definitely some room for manoeuvre. Indeed, one can only expect that even more opportunity for interest rate reductions will present for banks over the next 12 months.

Earlier this year, the Minister for Finance requested the Central Bank to produce a report on interest rates and, following its publication, he met the six main mortgage lenders to outline his concerns. The meetings focused on the comparatively high standard variable rates being charged by the banks in Ireland. Following the meeting, the banks agreed to review their interest rates. To date, the response from the banks has been disappointing to say the least but I do not believe that the legislation being proposed by Fianna Fáil will provide us with a timely or, more importantly, sustainable solution to the problem. With little or no real competition happening in the Irish mortgage market, there is an onus on us all to create the kind of environment where foreign lending institutions are attracted to the Irish market. We have an economic recovery underway, we have a corresponding increased demand for housing and we have those high interest rates being charged by existing banks. It is reasonable, therefore, to expect that some of those foreign lending institutions are already contemplating entering the Irish market. At this point, the last thing we need to do is provide for State control of interest rates, which would shut down that kind of healthy competition overnight. In its report, the Central Bank outlined that there was a very real danger of extinguishing badly needed competition by imposing interest rate reductions. In fact, the report cautioned that any policy steps to interfere with the rates charged presented a very real risk of damaging side effects. In the last few days, the Central Bank has reiterated to the Department of Finance its stated policy opposition to setting and enforcing mortgage interest rates. In essence, this Private Members' Bill would give powers to the Central Bank that it simply does not want to use.

Bearing the above in mind, the engagement between the Minister, Deputy Noonan, and the banks is set to continue. He has made it abundantly clear that a follow-up set of meetings will take place with the banks in advance of the budget. He has also made it clear to the banks that the issue of a penal banking levy in the budget will be considered if sufficient progress is not made on this issue. As late as today, the Taoiseach emphasised that the option of a banking levy in the upcoming budget remains available to the Minister for Finance in the absence of real and substantial movement from the banks. It is not, therefore, the time to legislate on this issue as the effects of moves by the banks have not yet become clear and a review of the situation is ongoing. The Minister, Deputy Noonan, retains the right to act decisively in the budget if the banks steadfastly refuse to make any significant gesture in this area. The Taoiseach also remains open to introducing legislation if the Central Bank deems it necessary and, perhaps more importantly, wise to do so.

The Government remains acutely aware of the pressure mortgage holders are under and is being very proactive in working to reduce this pressure. However, the requirement to be proactive does not and should not allow one to set aside all wisdom and engage in knee-jerk and potentially damaging actions which could exacerbate rather than solve this problem.

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