Tuesday, 28 June 2022
Central Bank (Variable Rate Mortgages) Bill 2022: First Stage
That leave be granted to introduce a Bill entitled an Act to provide for measures to address market failures in the market for principal dwelling house mortgage loans, and to provide for related matters.
I am pleased to move that leave be granted to introduce the Central Bank (Variable Rate Mortgages) Bill 2022. The general purpose of the Bill is to provide for measures to address failures in the market for principal private dwelling house mortgages. The Bill, as the House might be aware, is virtually identical to a 2015 Bill crafted by Deputy Michael McGrath, now Minister for Public Expenditure and Reform. That Bill was reintroduced in 2016.
In essence, this Bill, if passed by these Houses, would under section 2 of the legislation empower the Central Bank as the financial regulator to impose reasonable caps on the variable rates of interest charged by lenders in this country on mortgages on homes once the market and the conduct of the institutions have been assessed against a range of factors set out in section 3. Those factors, which would be examined every three months, include the reasonable profit expectations of the lenders, an analysis of the rates being charged by all lenders and the relationship between the variable interest rates charged by a lender and the cost of funds to the lender.
Section 4 defines market failure, with section 6 making provision for the kinds of reasonable caps the Central Bank will be enabled to impose on lenders in the mortgage market where a market failure exists in the view of the Central Bank. The Bill goes on to make provision for fines and enforcement orders against institutions where there is non-compliance with directives from the Central Bank and so forth.
Section 7 provides that, in setting a variable interest rate for a group, class or category of principal dwelling house mortgages, a lender must not discriminate between existing borrowers and new borrowers.
With ECB interest rates set to rise significantly over the coming months, analysts believe that, in a few months' time, a homeowner with a mortgage of €300,000, for example, could end up potentially paying €300 to €400 per month in repayments on top of what they are already paying. At a time when hard-pressed households are getting more and more squeezed as a result of the falling value of wages and incomes amid a cost-of-living crisis, the likes of which we have not experienced in almost 40 years, it is absolutely incumbent on the Oireachtas to do all we can to protect the standard of living of those who are struggling to make ends meet.
This House will know only too well, since the fact has been repeated ad nauseam, that Ireland is notorious for having the second highest mortgage interest rates in the EU, beaten into second place by Greece. There was an argument for intervention in the market in 2015 and 2016 when the first iteration of this legislation was very enthusiastically tabled by Fianna Fáil. We were told at that time by the then Minister, Michael Noonan, that such an intervention could well be unconstitutional. Since then, the Oireachtas has capped the high interest rates charged by moneylenders, an intervention in the market. We were told that competition would bring rates down. It has not. With KBC and Ulster Bank exiting the market, competition has diminished even further since 2015 and 2016. We still have the second highest variable mortgage rates in Europe and people are being absolutely hammered. We were told at the time that the Central Bank did not want the power to cap the mortgage interest rates charged. The Central Bank needs to be reminded that it is the Oireachtas, not the Central Bank, that legislates. It is the job of the Central Bank to regulate using the powers that are provided to it by the Oireachtas. The Central Bank must be reminded too that a central part of its mandate, which it conveniently forgets sometimes, is to protect the interests of the consumer, who has been absolutely clobbered for far too long with extortionately high mortgage interest rates, even when the cost of funds has been historically low.
I look forward to a debate in the House on the substance of what is an urgent Bill and an urgent intervention for 500,000 homeowners and mortgage-holders who are potentially very vulnerable if we are to see the kinds of mortgage interest rates the likes of Philip Lane, chief economist at the European Central Bank and former Governor of the Irish Central Bank, predict we will have over the next year. I am pleased to introduce this Bill and I look forward to a detailed debate on it in due course. I hope we can have that debate urgently as we move to Second Stage.