Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I am delighted to wrap up the debate on this legislation. I thank all the Deputies from all sides of the House for contributing to what has been a very good debate. This Bill is intended to help mortgage holders. It is an honest effort on the part of Fianna Fáil to come up with a solution to the issue of excessive standard variable mortgage rates being charged to about 300,000 customers in Ireland. Those who derided Fianna Fáil's efforts in this regard over the last two nights should bear in mind that the essential tool this Bill sets out to provide to the Central Bank is one of two options the Minister himself is considering if he is not satisfied with the response of the banks to the efforts to reduce rates.

Over the last few months, we as a party have placed sustained pressure on the Minister, on the banks and on the Central Bank to deliver progress on this issue. There has been some progress, but it has been minimalist and insufficient. The response by the banks has been selective. Many customers who are in negative equity or have very little equity in their homes will not benefit at all from the changes that have been announced. It is worth recapping the variable rates that exist, even taking account of the new loan-to-value, LTV, products that some of the banks have announced. Variable rates for borrowers with an LTV ratio of between 80% and 90% are 3.9% with AIB, 3.95% with EBS, 4.3% with KBC if one moves one's current account there, 4.3% with Ulster Bank, 4.2% with Permanent TSB, 4.35% with ICS, 4.5% with Bank of Ireland, 4.95% with Danske Bank, and 4.4% with Rabobank. That is the actual picture for people who remain on a variable rate, even taking account of the LTV changes, and who have equity of less than 20% in their properties. Those who most need the help are getting the least help, and that is fundamentally unfair.

The other major option the banks are setting out is to move to a fixed rate. Moving to a fixed rate is a gamble. It might work out, but equally it might cost a person money. I am not going to advise people either way, unlike the Minister, who sent a clear signal last night on the news that people should enter into fixed rate arrangements. I will send no such signal because I do not know in what direction variable rates are going to go. We all want to see more competition brought into the Irish market, but there seems to be an assumption that some knight in shining armour is going to come over the horizon and offer rates of 2% to 3% in Ireland. There is no sign of that, because the Irish market is very small. About 52% of residential mortgages are trackers, which makes the market less attractive. We have mortgages with a value of about €20 billion that are in arrears, which also makes the market unattractive for a new entrant. I hope I am wrong, but I see no sign of a new entrant to the market. The only evidence so far of a new entrant has been vulture funds buying up mortgages from the former Nationwide, Bank of Scotland and others.

The reality is that, in the absence of legislation, any bank in Ireland today or any vulture fund owning a mortgage can hike the interest rate to whatever it wants, to 7% or 8%, and the Central Bank does not have a tool to deal with that. That is a deficiency which exposes mortgage holders to a very real risk. The issue here is that the cost of funds for the banks has fallen dramatically, to as low as 1% or 1.5%, as the Minister knows well. Introducing a bank levy in the autumn is not the way to go. It will simply result in higher charges or higher interest rates for some bank customers, and the Minister should not be doing that. Customers who are considering entering into fixed rate mortgages should now take advice, because the banks are clearly trying to induce them. They should tread very carefully and they should get independent advice. Many standard variable rate customers are trapped, especially those who borrowed in recent years, who are in negative equity or who have a very high loan-to-value ratio, as I have outlined. That is an issue the Minister needs to take up with the banks.

It would be remiss of us not to point out the obvious link that exists between high standard variable mortgage rates in Ireland and the level of mortgage arrears. The Central Bank has previously highlighted that link in a report because there is a very obvious connection. Many speakers have spoken about switching one's mortgage, as though it is similar to switching one's electricity supplier from Airtricity to Energia. It is not that simple. It is complicated, it takes time and it costs money. People should of course examine the possibilities and see whether they can gain from a switch, but for many people it is not the solution. The bottom line is that variable rate customers in Ireland are being treated unfairly. There is no justification whatsoever for the rates that are being charged in Ireland.

When the Minister is considering the response that the banks have provided, he should make the point that variable rate mortgages are a product in themselves and that product should be priced appropriately. Trying to direct people to fixed rate products is not the solution because ultimately it is a gamble that may or may not work out. He should bear that in mind. Ultimately, this is an issue of brass tacks. It is a bread and butter issue. It is about money in one's pocket. With each passing month that the Minister delays taking serious action on this, families are having to come up with additional money to pay the interest on their mortgage. They deserve the action of the House. That is why we commend this Bill to the House and it should be supported by all sides.

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