Speech on Exorbitant Variable Rate Mortgages

At the Fianna Fáil Ard Fheis last weekend which took place in the RDS, I spoke about the serious issue of high rates charged to variable rate mortgage holders in Ireland today. Customers with standard variable rate mortgages are paying well above the odds compared to identical products across the eurozone. Families will pay up to €6,000 more interest per annum currently than similar sized tracker mortgages. Political pressure must be brought on the state owned banks to correct this.

Transcript of my speech: That this Ard Fheis condemns the practice of the banks who are not passing on mortgage interest rate relief which is crippling over 300,000 home owners as Ireland has the highest variable mortgage rate in EU.

A mortgage is the biggest single financial outgoing for a family. There are at least 300,000 households who are on standard variable rate mortgages. Including my own. These families have benefited least from the current low interest rate environment 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 with a tracker mortgage. Fianna Fáil has led the fight on their behalf for fair treatment. This week our Finance Spokesperson extracted from AIB a commitment to reduce their variable rate in the course of the next couple of weeks.

However rather than being the end of the issue, it is only the start of it. We will continue to put pressure on AIB and other banks to treat their mortgage customers fairly.

We all understand the need for the banks to recover. But it cannot be at the expense of hard working home owners being squeezed on punitive and unjustifiable interest rates.

The banks are now in public ownership – and must bear some social responsibility.

It is our firm belief that the rates being charged are not justified based on banks’ cost of borrowing. The extent of the problem can be seen from the fact that the standard variable rate for residential mortgages charged by State-owned permanent TSB and AIB / EBS as well as other banks operating in the market is up to 2% higher than equivalent mortgage rates in other euro zone countries. Banks which operate in the Republic of Ireland and Northern Ireland are charging customers in the Republic 2% more for a standard variable rate mortgage. This is simply unacceptable.

It is an insult for banks to claim that losses on tracker mortgages are somehow a reason to rip-off SVR customers. It is no more justifiable for variable rate customers to be asked to make good these losses than it would be for them to pick up the tab for losses on development or commercial loans or any other part of the loan book. The challenge that tracker mortgages create for banks should be tackled as part of the overall review of bank debt.

The Government are simply wrong to say that they cannot intervene. In fact in the past they were happy to claim success in persuading the banks to reduce their variable rates in 2011. However since then little or nothing has been done since. It is unacceptable fact the Economic Management Council has not met the banks since June 2012 and it is only under pressure from our Party that progress is being made.

The Irish tax payer has already had to bear the burden of banking losses.

Now variable mortgage payers should not have to bear the burden of tracker losses.

For too long the banks have been part of the problem – it’s high time they became part of the solution.

Banks – do the decent thing – cut your variable rates now in line with the rest of europe – and give a much needed break to ordinary Irish families.

Apart from being socially responsible it is just good business sense.

More affordable rates means less arrears means more people staying solvent, more people staying in their homes, more people making their repayments, a better book for the banks and a better deal for their hard pressed customers.

We are also demanding that the banks open up the market for switcher mortgages. Banks like to give the impression that they are willing to take on the mortgages of existing customers of other institutions but in reality very few are ever completed. We need a competitive mortgage market to meet the needs of customers.

Delegates, No other party has given this issue the attention we have. As a campaigning party we have put this issue at the centre of our policy platform. We are proud of what we have achieved to date and will continue until the shameful and inequitable treatment of variable mortgage holders is ended.

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