Paschal Mooney (Fianna Fail) | Oireachtas source

What happened was a national scandal. The Minister of State is still involved in discussions on the future. Like us, he hopes that what happened will never recur.

As my colleagues did, I compliment Senator Barrett on this timely legislation. I am disappointed that the Government is not inclined to accept it. I appreciate that getting Private Members' Bills through is always difficult, but the general sentiment on all sides of the House suggests that it should be agreed on Second Stage at a minimum. As is often done, the Government could then examine it and determine whether there was any merit in its proposals.

Last Monday, Davy Stockbrokers stated the likelihood that there had been close to €3.2 billion of new mortgage loans in the first three quarters of 2015. However, it also stated that the Central Bank's recent bank lending survey had indicated that financial institutions expected to tighten credit availability in the final quarter. This is consistent with anecdotal evidence that banks have largely used up their 15% allocation of new mortgage loans that are allowed to breach the 80% loan-to-value limit set by the Central Bank. In previous years, mortgage lending in the fourth quarter was distorted upwards by the end of capital gains tax exemptions or mortgage interest reliefs. As such, lending may fall further than anticipated. If so, the final outturn for mortgage lending this year may, according to Davy Stockbrokers, "still fall short of our €4.2bn forecast". Here in black and white is an indication of what it refers to as the dysfunctional nature of the mortgage market.

There seems to be a general perception abroad that the Government has been given the two fingers whenever it has tried to rein in the banks. It is somewhat ironic that banks that relied on taxpayers' money to bail them out seem to be holding on to their power now that they are in profit. The impression given is that any attempt to broaden access to the mortgage market is being shot down in flames "because, because, because".

The banks are back in profit. AIB is discussing repaying some of the €21 billion that was given to it by the taxpayer through the Government. It asserts that it will repay all of that amount eventually and will start with €2 billion in the next six months. It has also mentioned floating some of its shares on the stock market. Bank of Ireland intends to repay more money to the Government in the coming months. As such, it is not as if the two pillar banks are in any way cash starved, yet their response to the demand for rate reductions, which is what I am alluding to, has been inadequate. Despite the fact that variable rates in Ireland are more than 2% higher than the EU average, the only bank to offer a straight cut is AIB, including its EBS and Haven Mortgages subsidiaries, whereas Bank of Ireland still has a standard variable rate of 4.5%. The issue has not been resolved. In effect, banks have openly defied the Government.

I imagine that the way banks are dealing with potential mortgage applicants and current mortgage holders partly influenced Senator Barrett's motives in tabling the Bill. The rates charged are not justified based on the banks' cost of funds. Recently, AIB announced that it had raised €750 million at a cost of 0.66% per annum. This five-year bond deal highlights the extraordinarily low cost of debt for banks on the market. It is driven down by a number of factors, including indirect financial support from the ECB. It shows the extent to which mortgage customers are being ripped off. Keep this in mind. AIB is borrowing money at 0.66%, yet it is charging 4.5% on variable rate mortgages. That is a scandal, a scam and a rip-off. If one saw a story like this on the Internet, one would get on to the local Deputy or Minister to have something done about it.

The reduced fix rates are not adequate for customers. Bank of Ireland and KBC have left their variable rates unchanged and only offer reductions in fixed rates for a period of two to five years. This may not be suitable for a large number of customers, as they would not be able to benefit from future rate reductions or lower rates offered by new market entrants. Fixed-rate mortgage holders who want to sell their homes would have to pay a penalty for breaking the fixed terms early.

AIB and Bank of Ireland have returned to profitability and PTSB is set to do so next year. There has been an extraordinary turnaround in the banking system. These banks were bust. They helped to bring down our economy. Not only are they back in profit, but they are thumbing their noses at any attempt to bring fairness and equity to the market, in particular where mortgages are concerned. We would argue that the need for profitability is not a justification for ripping off mortgage customers. I am sure that the Minister of Sate agrees. Global ratings agency Fitch stated that, if banks reduced the cost of home loans, it would make debt more affordable for the borrowers to service, reduce stress levels on home owners and increase the chance that lenders would get their money back.

The Bill deals comprehensively with these issues. What Senator Barrett has proposed is balanced between the obvious need for banks to be profitable and the rights of customers to be treated fairly. The Central Bank would be given responsibility for monitoring the level of competition in the mortgage market and the fairness of rates charged. This would act as a strong deterrent to banks from charging excessive rates and would only necessitate Central Bank action where the evidence pointed to a clear market failure.

Reduced rate offers must be made available to current clients. Banks are engaged in a policy of making certain offers available to new customers only. For example, some current KBC customers with loan-to-value levels of less than 60% are paying 4.3% for their mortgages compared with the 3.4% that is available to new customers. For someone with a €250,000 and 25-year mortgage, this means a difference of €118 per month or more than €35,000 over the loan's lifetime. My friend and colleague, Senator Ó Domhnaill, showed me the figures. They make for extraordinary reading. At a purchase price of €350,000 with a down payment of €70,000, a mortgage of €280,000 on an annual interest rate of 4.5% over 25 years results in a monthly payment of €1,500 plus and an overall repayment of €465,343. Surely this scandal must stop.