Gerald Nash (Louth, Labour) | Oireachtas source

I spoke in favour of a similar motion in February and since then, there has been a further hike in the European Central Bank, ECB, rates. It is the sixth such rise since July of last year. As we know, the ECB governing council is meeting again in early May. It said it will use data to inform its next move. Irish mortgage holders will anticipate that meeting with dread.

As I said in this House previously, I and the Labour Party remain somewhat sceptical about the efficacy of mortgage interest relief as a public policy instrument in delivering help to the households that need it most. In the past, it has tended to favour the better off with the bigger mortgages. We know that in 2008, the relief cost €800 million for that year alone. We know, too, from independent research that it was the richest - those who live in the biggest and most expensive houses - who benefitted the most. It was a policy where, perversely, the lowest earners with no homes to call their own subsidised the better off through taxes. The transfer of wealth from the have-littles to have-lots was in many ways a reverse Robin Hood. In light of six ECB rate hikes since last July, however, and the more recent concerns over rate increases expressed by the Money Advice & Budgeting Service, MABS, and Free Legal Advice Centres, I absolutely understand why the case would be made for a measure like this on the basis that it would be targeted and time limited. The Labour Party supports this motion this evening.

Initially, Irish banks were reluctant to pass on these ECB hikes to domestic mortgage holders. However, inevitably, that has changed more recently, and householders are now facing major hikes in their mortgage costs. It is in that context that I and the Labour Party support this motion for targeted and temporary mortgage interest relief equivalent to 30% of the increased cost of the mortgage capped at €1,500. It is but one contribution to the challenge of high and growing mortgage costs. We would like to see the Government go further, however, and adopt the Labour Party’s approach in delivering real relief to mortgage holders and guard against future rate hikes by the introduction of a mortgage rate cap. The Minister will be familiar with that approach because it is something he himself proposed.

People are already being hammered by the cost-of-living crisis and these constant mortgage rate hikes are like repeated body blows to households who are already struggling to make ends meet. There is a very real possibility that rates will continue to rise. That is why Government must urgently get a grip on this situation and stop playing catch-up like it has done with energy cost rises.

The Labour Party proposed legislation to take the heat out of this situation and relieve some of the financial pressure on mortgage holders. Our Central Bank (Variable Rate Mortgages) Bill 2022 would enable the regulator to impose caps on mortgage interest rates charged by the banks where a market failure is shown. The Minister will be familiar with that approach. The legislation I refer to draws inspiration from a Bill the Minister tabled when he was in opposition as Fianna Fáil finance spokesperson just a short number of years ago. If the Minister's Bill was necessary then when he was in opposition and, I will remind him, in an era of low interest rates, he surely must agree that it is essential now with more ECB rate interest hikes on the way.

There is a precedent for the Oireachtas to enable the Central Bank to intervene in the market once certain clear thresholds are met or, indeed, breached. We passed legislation in this House in recent years to impose a cap on the interest rates on moneylenders. There is no constitutional impediment, as was argued previously. It had been argued by the 2016 to 2020 Government in terms of the Bill that it proposed with regard to mortgage caps. There is no constitutional impediment to enabling the Central Bank to intervene in the market and introduce reasonable caps on interest rates charged by financial services providers. That is established. The only impediment is the lack of political will and ideology.

Commentators suggest that mortgage interest rates could soar towards 4% later this year as Irish banks begin to pass on the costs to more customers. AIB introduced rate increases across all mortgage types for the first time since the ECB began hiking rates last July. This move has affected thousands of borrowers. The policies of the other main lenders are changing too, and we anticipate significant changes over the next short period in response to ECB moves. The ECB president, Ms Christine Lagarde, is on record as saying there were likely to be further rises in the ECB rate and nobody knows where this will end. While we must, of course, respect the independence and the independent mandate of the ECB - the ECB and our own Central Bank are independent of Government for good reason - hardly anybody is questioning the continuous increases to interest rates being signed off by the European Central Bank from a policy point of view.

At times of high inflation, central banks have always routinely reached for the interest rates tool to dampen demand and activity and take inflation down. That is traditionally what has been done. We know there can be a lag, of course, between actions and the impact on an economy. When one looks at the some of the main indicators, however, perhaps it is time that the reliance on interest rate rises as the almost exclusive weapon for tackling inflation ought to be critically reviewed.

I say that because successive rises have not demonstrably impacted demand the way interest rate rises have in the past. It has not impacted significantly on bank lending. Savers, as was referred to earlier, have seen no benefit whatsoever in terms of interest rates on deposits. We have seen the phenomenon of greedflation, with big firms profiting enormously off the backs of customers and charging high prices at the checkout, even as input costs go down; all, of course, under the guise of the rising cost of living. The European Central Bank, hardly an anti-poverty NGO, also recognised this phenomenon. It has acknowledged that hyperprofits contribute to the inflation being felt most acutely by the least well-off. There is a very live debate happening across the European Union now about how that should be dealt with. One way is to consider a windfall tax approach on superprofits, for example, big supermarket chains raking it in at the expense of the ordinary consumer. We have seen the impact of enormous food price inflation and we know who is impacted most by it - those on low and modest incomes, those predominantly on low pay and people who depend on the State for their income. Those are the types of policy perspectives that ought to be considered, not simply all the time reaching for the tool of increased interest rates to deal with inflation. The policy debate needs to refocus and examine tackling outrageous corporate profits, rather than asking young mortgage holders and small businesses with loans to carry the can. There have been six successive hikes which have added hundreds of euro a month to the average family mortgage. The hikes show no sign of stopping; in fact, it is only going to get worse.

All of this occurs at a time when the Organisation for Economic Co-operation and Development, OECD, today reported a study, which I am sure the Minister has been briefed on and is familiar with, which stated that Irish households are, for the first time since 2013, experiencing a reduction in living standards and seeing them fall. That is despite the package the Government introduced last year in the budget, which contained a series of once-off measures and the repeat of some measures announced earlier this year. The Government's response is failing. It is not hitting the target or addressing these issues. We are in a real crisis and it behoves the Government to use every weapon at its disposal to cushion the impact of high costs for citizens across the economy, including mortgage holders and variable interest rate mortgages. The Labour Party supports the principles of the motion.

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