Mortgage interest rate cap needed now
Any potential rise in European Central Bank (ECB) interest rates will clobber almost half a million hard-pressed homeowners according to Labour finance spokesperson Ged Nash.
Speaking in advance of an expected ECB interest hike tomorrow (Thursday 21st July) Deputy Nash called on the Government to adopt Labour’s recently introduced Bill and change the law to cap mortgage interest rates.
Deputy Nash said:
“We need a cap on mortgage interest rates now. Irish consumers are already being hammered with variable interest rates on home loans ranging between a high of 4.5% to a low of 2.7%. With ECB interest rates set to climb, working people may have to find an extra €400 a month, even on a relatively modest mortgage of €250,000, to cover the cost of a series of hikes expected over the next year. For hundreds of thousands of people that is simply unsustainable, especially at a time when the cost of living is out of control.
“The reality is that a young person or a couple buying their first home will be stretched beyond their limit with these hikes while young families with years left on their mortgages will face an unbearable strain on their finances from rising rates.
“We need the government to step up here and the Central Bank to provide a pathway to bring mortgage interest rates in Ireland more in line with the EU norm. Ireland already has the second highest mortgage interest rates in the EU, beaten only by Greece. The previous government said competition would solve this problem. Instead, we have banks leaving the market with the remaining lenders left ruling the roost.
“The Labour Party has the legislation to help take the heat out or rising ECB rates and to take some of the pressure off people. Our Central Bank Variable Rate Mortgages Bill draws inspiration from a Bill tabled by the Minister for Public Expenditure, Michael McGrath, not once but twice, when he was Fianna Fáil spokesperson on Finance. If his Bill was necessary then and in an era of low interest rates, he will agree that it is absolutely urgent now.
“Our legislation will empower the Central Bank as the regulator to carry out detailed assessments of the market and the behaviour of financial institutions, ultimately enabling the regulator to impose caps on mortgage interest rates charged by the banks on private homes where market failure is shown.
“The Oireachtas has already imposed a cap on the interest rates on moneylenders. This shows there is no constitutional impediment to enable the Central Bank to intervene in the market and introduce reasonable caps on interest rates charged by financial services providers. The only impediment is stifling managerialism and the lack of political will at government level.
“A cap on mortgage interest rates will save families thousands of euro over the lifetime of their mortgages. The sad reality is that the only way is up for interest rates but this law will cushion the blow for working people, by sending a message to the dominant Irish banks that they must move to the EU average and stop seeing homeowners as a soft touch to pad out their already massive profits.”