Frank O'Rourke (Kildare North, Fianna Fail) | Oireachtas source

I commend Deputy Michael McGrath for tabling the motion and thank him for the considerable amount of work he has carried out on behalf of beleaguered variable rate mortgage holders. Fianna Fáil has been trying since July 2015 to take the banks to task on the subject of rip-off variable rate mortgages and I welcome the opportunity to contribute to this long-overdue debate.

More than 300,000 households hold SVR mortgages and, collectively, owe €40 billion. While the recent reduction by some banks of their rates is to be welcomed, the interest rate on some variable rate mortgages still stands at approximately 4.5%. This means that a customer on an existing variable rate mortgage over 20 years is paying approximately €1,500 per year more than in the offer available to new customers and €6,000 more per year than a customer with a tracker mortgage for the same amount.

For all that the banks have been advertising in promoting the switching of mortgages, the reality is not so simple. With extensive legal fees and loopholes attached to such transfers, the banks are very vocal in their offer of cash back or assistance with legal fees in their bid to attract new customers. However, they are doing nothing to help existing mortgage holders to make a switch. There is a clear case for the Central Bank to introduce a statutory code of conduct on mortgage switching, similar to the code in place for switching a current account from one financial institution to another which has proved successful. A statutory mortgage code that would clearly set out the obligations of a financial institution and protect the rights of the mortgage holder is urgently required.

The banks' refusal to budge on variable rates to offer reduced fixed rates to existing customers is another inadequate response that is not sustainable for the large number of customers involved. Locking customers into what is only a marginally reduced rate for periods of between two and five years means that these customers have been excluded from potential rate reductions or availing of lower rates from new entrants to the market. Additionally, it has a significant impact on homeowners who are trying to sell, given that they would not have to incur penalties to break from fixed terms. It is unfair to expect customers, already squeezed by excessive variable rates, to accept that fixed-term rates are the solution.

In most instances, the monthly mortgage repayment is the most significant financial outgoing of a homeowner, whether a family, a couple or an individual. In most cases, homeowners have been left to look on in frustration and distress as they see their mortgage rates unchanged while rates have fallen generally. Mortgage arrears are at a distressingly high level and a devastating human toll has been taken on hard-pressed families and individuals. Excessive variable mortgage rates are linked with record levels of mortgage arrears. A 2012 Central Bank report concluded that high variable rates continued to exert upward pressures on arrears. Banks' engagement with those in mortgage arrears has been piecemeal at most and the solutions offered are inadequate.

Variable rate mortgage customers are now on interest rates that are three times those being paid by tracker mortgage borrowers. While we recognise that tracker mortgage borrowers represent a significant drain on the banks' loan books, it is not an acceptable reason to rip off standard variable rate customers.

The Bill before the House is designed to give the Central Bank new powers that would have the effect of reducing monthly repayments for many of the 300,000 standard variable rate customers and it will also give comfort to the 46,000 who have loans in the hands of non-bank lenders. This Bill is a necessary response to the complete failure by many lenders to pass on the lower interest rates set by the European Central Bank. While increased competition in the mortgage market, which seems to be the solution on offer by the Minister for Finance, is to be welcomed, it is again a wholly inadequate response.

I welcome the measures outlined in the Bill and many of the home owners I have been speaking to in my constituency of Kildare North are anxious to see tangible and viable solutions to the problem of exorbitant mortgage repayments. People have suffered enough at the hands of the banks. We have an opportunity to make a difference to thousands of hard-pressed mortgage holders. I urge, therefore, that the Bill be passed to Committee Stage with a view to all Stages being completed and the legislation being put in place as soon as possible.

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