Fixed Interest Mortgages should be the future in Ireland – Hayes
Brian Hayes MEP today said that between banks, policymakers and regulators, we need to pave the way for fixed interest rate mortgages to become the norm in Ireland into the future.
“For most people, taking out a mortgage is the single biggest financial transaction they will make. From a consumer point of view the Irish mortgage market is extremely dysfunctional and lacks fairness. Currently variable rate mortgage holders are still being fleeced by the banks to pay for losses on tracker mortgages. There have been some reductions in mortgage rates over the past year but we’re still miles away from our European neighbours.
“Long term fixed interest rate mortgages now being offered by Irish banks are not competitive compared to the situation in mainland Europe and in the US. Bank of Ireland is the only Irish bank to offer a 10 year fixed interest mortgage product which has a rate of 4.4%. Most other banks offer fixed interest terms of 5 or 7 years at most and they charge an interest rate of between 4 and 4.5% for these. There is absolutely no point for customers to avail of such high rates, particularly when variable rates are being reduced, albeit slowly.
“What is astonishing to me is that it’s possible to get 20 year fixed mortgage products in the US and in other European countries for 3% or less. In Belgium, I can go into a KBC bank and get a 20 year fixed interest mortgage for 3.15%. In 2015 in France, you could get a 20 year fixed interest mortgage for 2.4%. These rates are so low because the current ECB interest rate is so low. In France and Belgium, the banks are clearly passing on the benefits of lowers rates to consumers. In Ireland we are still being overcharged.
“I believe the time is now right for a radical new approach to the mortgage market. The new government needs to prioritise working with banks, regulators and other institutions to pave the way for long-term fixed interest mortgages at competitive rates. It should be examined whether the National Housing Finance Agency can be used as a vehicle for providing such mortgages by raising funds on the international markets at low rates. The government should also work with the Credit Union to give it more flexibility to operate in the mortgage market. In any of these cases, the government should prioritise getting long-term fixed interest products to market. This would force existing players to reduce rates and become more competitive.”