Wednesday, 27 May 2015
Central Bank (Mortgage Interest Rates) Bill 2015: First Stage
That leave be granted to introduce a Bill entitled an Act to provide the Central Bank with the power to direct the covered institutions to lower mortgage interest rates in certain circumstances.Within the first few months of the Government's election, I put it on notice that the banks were ripping off Irish mortgage holders and that the new administration needed to take a firmer line. Were it not so serious for hundreds of thousands of people, the response from the Tánaiste at the time, Deputy Eamon Gilmore, would have been funny. He told me: "Deputy Doherty need be in no doubt that this Government will act decisively, forcibly and effectively with the banks." We all know what has happened since, however. The banks have ruled and the Government has done their bidding.
My Bill, which my party hopes to debate during our Private Members' time in two weeks, marks a change from the hands-off attitude to one that is on the side of mortgage holders not the banks. It is two years since I introduced in the House the Interest Rate Approval Bill on the same issue. My Bill today goes further. It proposes to introduce for the first time a process whereby the Central Bank can set a maximum cap on the standard variable rate that the covered institutions can charge their customers. The Minister for Finance will be able to prod the Central Bank to undertake a review which could lead to the rate being set. He or she will be able to ask for reports on the use of these powers and make regulations as to how the powers can be used. The Bill allows the Central Bank to come to a decision as to whether to set a cap after considering a range of factors as outlined in section 2. These factors include among other things the current rate an institution charges, the ECB rate, the viability of the bank and, crucially, the impact of the rate on mortgage holders.
The Bill is designed for where we are today. Any cap to rates will lapse after 12 months unless it is renewed. After six months, a bank may lodge an appeal which the Central Bank must consider. The entire legislation is designed to lapse at the end of 2017. This is a reasonable approach to dealing with this crisis. Things cannot go on as normal because the mortgage market in the State is certainly not normal. The Government would have us believe that its version of asking and begging the banks to lower their rates is paying off. I ask Members to ask the customers of Bank of Ireland what they think about that. The banks know the Government. They know it will not stand up to them. What is needed is a firm stick. What is needed is for the law to be amended so that a maximum rate can be applied by the Central Bank after considering the social and economic aspects of any such decision. Under the Bill, ignoring the Central Bank's direction will be to commit an offence.
We cannot carry on with some mortgage holders being ripped off while their neighbours on tracker mortgages pay the market rate. We cannot carry on in a situation where the lack of competition is used as an excuse to keep rates artificially high. The Bill is an extraordinary measure for extraordinary times. We cannot go on pretending we live in a normal banking environment. The banking sector is still a major drag on the economy and the banks must start to play their part in creating a fair recovery. To implement the Bill would be an important push forward and a practical way to help struggling families. Sinn Féin will bring the Bill to the floor of the Dáil for debate and vote. I urge all Deputies, whether Opposition or Government, to support it in the interests of the hundreds of thousands of variable rate mortgage holders being ripped off by their financial institutions.