Speech on Fianna Fáil Private members Bill on Mortgage Rates

I welcome the opportunity today to speak in favour of this Fianna Fáil Private Members’ Bill.

All present in the Chamber today are aware of the fact that a mortgage is the biggest single outgoing facing any family. There are at least 300,000 households in this jurisdiction operating under standard variable rate mortgages, including my own. Tens of thousands of variable rate mortgage customers are currently paying exorbitant rates, which we all know and hear about daily in our constituencies, on the airwaves and in our clinics. We know them to be substantially in excess of the banks’ costs for the same funds.

We, in this country, have benefitted least from the current low-interest regime which prevails in Europe. For a typical €200,000 mortgage, a standard variable rate customer will pay approximately €6,000 a year more in interest than a borrower on a tracker mortgage. Any hard-off family around the country would be far better with this extra money at its disposal. It would mean more money to spend in the local economy to pay their bills, their car loans, their school costs, their educational costs and their household bills, and more money in general placed back into the local economy and environment, which would be a far better placed home for it than super-normal profits in the banks. The plights of these families should be as important to us all as the determination rightly to make our banks more profitable again but we have to get our priorities, and the balance, right. We all understand the need for the banks to recover, particularly now most of them are in public ownership, but it cannot be at the expense of hardworking homeowners squeezed on punitive and unjustifiable interest rates. The banks must begin to bear social responsibility.

I welcome the recent announcement of a reduction by AIB, to 3.4%, in its standard variable lending rate. However, other banks have been less forthcoming. For instance, Bank of Ireland made no reductions at all in its standard variable rate and yet announced last year a rise of 30% in pre-tax profits, with profits in 2015 of €1.2 billion. This is an astronomical profit for a bank that has passed no return or leeway on to the hard-pressed consumers, taxpayers and constituents. The Permanent TSB highest rate for consumers in negative equity or whose mortgage is equal to 91% or more of the value of their home, is 4.3% – a reduction, it is acknowledged, although a bare one, of 20 basis points.

It is my firm belief that the rates being charged are not justified based upon the banks’ cost of borrowing. The extent of this problem can be seen from the fact that the standard variable rate for residential mortgages by the State-owned Permanent TSB and AIB, as well as other banks in this jurisdiction, is two percentage points higher than the equivalent mortgage rates in other eurozone countries. Banks operating both in the Republic of Ireland and in Northern Ireland also apply the two percentage points differential. If one lives in Newry or in Belfast, there is a differential of two percentage points in one’s rates depending on which side of the Border one lives on – for the same bank, for the same funds, for the same cost of borrowing and from the same European Central Bank underpinning the whole amount.

I also query, in such a market with a two percentage points differential between the rest of the eurozone and the Republic of Ireland, why we have not seen more licence applications, more entrants to the market and more competition emerging.

I ask the Central Bank to consider these questions, why these licences are not coming through, why these applications are not being made and what it is about our competitive landscape that makes us averse to it.

I utterly refute the banks’ claim that losses on tracker mortgages are an excuse to rip off SVR customers. It is no more justifiable for SVR customers to make good these losses than it is for development or commercial loans or any other part of the loan book. While it is acknowledged that tracker mortgages pose a challenge to the banks, it must be tackled as part of the overall review of banking debt. Our legislation would deal with this in a fair and equitable manner. It would provide a fair balance between the need for State-owned banks to make a profit and the rights of families who are paying mortgages. It is prudent and efficient for the Central Bank to be given responsibility for monitoring the level of competition and ensuring fair rates are charged. There must be a fair balance between the banks and the hard-pressed customers.

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