Michael Kitt (Galway East, Fianna Fail) | Oireachtas source

I commend Deputy Michael McGrath on the introduction of this legislation, which follows on from a Fianna Fáil Private Members' motion moved in the House on 31 May. I recall Deputy McGrath mentioning at that time that a person on a €200,000 mortgage over 20 years was paying up to €1,000 per annum more than that which would be paid, based on an offer, by a new customer. According to Deputy McGrath such a customer could pay €6,000 more than a person on a tracker mortgage of the same amount. These figures show the unfairness of the current situation.

I am glad this Bill is being discussed following the passing of the deadline within which banks were to provide meaningful reductions in monthly mortgage payments. There has been no significant action on the part of the banks to provide any meaningful reductions. The banks have sought to deny the existence of a problem and have fobbed off customers with minor changes to the rates. I understand that current data shows that the average standard variable rate in Ireland is 4.6%. Our MEPs have spoken out on this issue, particularly former Minister of State, Brian Hayes, who said that Irish house buyers are being ripped off by the banks. Our MEPs have examined the situation in the eurozone area where the average variable mortgage rate is 2.45%. We need a thorough investigation into why current standard variable rates do not reflect market conditions.

In other European Union countries there is a low interest rate environment. The bottom line is that in Ireland banks are still offering variable rates of over 4%. We have heard all of the excuses before in regard to Ireland's home loans rates, which are more expensive than in other European Union countries, with reference to the higher cost of funding and the effects of tracker mortgages. I do not think anybody could accept the excuses that have been given up to now. The banks have made mistakes and are now seeking to punish those who borrowed money from the financial institutions. Variable interest rate mortgage holders are now being charged interest rates that are three times those being paid by tracker mortgage holders.

The Central Bank figures show that approximately 240,000 mortgages were restructured by the end of 2013. The Simon Community have raised this issue in the context of homelessness and in this regard pointed out that 37,000 households are in mortgage arrears of two years or more. That there are 300,000 households on standard variable rate mortgages is an indication of the seriousness of this matter. These people are not benefitting from the current low interest environment that exists in Europe.

This Bill requires the banks to treat new and existing customers equally. We should not have a situation whereby banks have a policy of making certain offers available to new customers only. That is very unfair and it discriminates against existing customers. Three banks, KBC, Ulster Bank and Permanent TSB, currently charge the same variable interest rate of 4.3%. AIB charges 3.9%; Bank of Ireland charges 4.5% and Danske Bank charges 4.95%. A Bill that charges the Central Bank with responsibility for monitoring the level of competition in the mortgage market and the fairness of the rate to be charged should be welcomed. I believe it would act as a strong deterrent to banks charging excessive rates.

Sadly, even today the European Commission backed the hardline being taken by Irish banks in their refusal to slash variable mortgage interest rates for tens of thousands of families. Effectively, what the Commission is saying is that our bailed out banks should be allowed to profiteer on the backs of mortgage holders. European Union officials know that the mortgage interest rates here are too high but are warning against any moves that would undermine financial sector stability.

Many people are wondering why letters were sent to people who are not Bank of Ireland customers informing them about the availability of lower mortgage interest rates for Bank of Ireland customers. That information was wrong, in particular in respect of former ICS Building Society customers who are now Bank of Ireland customers. Bank of Ireland customers did not receive letters informing them about new rates for existing customers, the availability of a 2% cash back offer or a €4,000 cash back offer on a mortgage of €200,000. There are many questions to be answered in regard to the reason these letters were sent to people who are not customers of Bank of Ireland.

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