Time to consider a new levy on the banks if the scam on variable mortgage holders continues – Hayes

“Irish banks continue to gouge holders of variable rate mortgages” said Brian Hayes MEP at a public meeting in Dublin tonight. “The banks continue to charge almost 2% more for their product compared to similar mortgage products in the Eurozone. Interest rates for variable rate mortgage holders in the Republic are between 1% and 1.5% higher than similar mortgage customers with the same banks in Northern Ireland. We have a dysfunctional mortgage lending market at present in Ireland that is doing nothing to help the recovery of the country. Effectively variable mortgage holders are subsidising the banks for the losses they are making on tracker mortgages. 

“If the banks continue to play hardball with variable customers then the time has come for the government to play hardball back. Unless the banks indicate a willingness to reduce variable mortgage rates and bring them into line with comparable rates in Europe, then the government should introduce a special bank levy which could be used to provide additional relief through the tax system for variable rate mortgage holders.

“The Irish banks have very short memories. It was the taxpayers who saved the banking system. Six billion euro of capital invested in Irish banks was to provide for losses on their mortgage book. On this issue the banks are showing no concern for their customers. In effect they are now operating a cartel, exploiting their variable rate mortgage holders to make up for losses on the tracker loan books.

“The government also needs to consider how it might introduce much needed competition into the mortgage market. Because they were so badly burned on Irish property, foreign banks will be reluctant to enter the Irish property market. However the Central Bank should be encouraging foreign banks to provide long term fixed interest mortgages in the Irish market without necessarily opening branch offices in Ireland.

“The Central Bank should also be supporting plans by the Credit Union movement to provide a limited range of well secured mortgage products. 

“In order to introduce more competition into the market I propose that the Housing Finance Agency [HFA] should be tasked with providing 25 year fixed term interest mortgages, to first time buyers in particular. Properly funded the HFA could also offer to take existing variable rate mortgages from the banks and replace them with fixed rates for the remainder of the term. This in turn would force the banks to be more competitive.

“With interest rates at historically low levels there is an opportunity for a state backed institution such as the HFA to borrow long term at exceptionally favourable terms. There is now an opportunity to change in a fundamental way the mortgage market; replacing variable rates with fixed rates for the majority of customers. Such a development would be in the long term interest of mortgage holders and of the banks. Interest rates will not remain at their present low levels indefinitely.”

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