Mortgage bill should be put to one side until CCPC investigate variable rates -Hayes
Brian Hayes MEP today said that the proposed variable mortgage rates bill should be put to one side until the Competition and Consumer Protection Commission (CCPC) carries out a proper investigation of variable mortgage rates.
“The variable mortgage rate dilemma is arguably the biggest issues faced by Irish consumers at the moment. We need answers as to why Irish banks are still charging over the odds for variable mortgages compared to Eurozone counterparts.
“There has to be a thorough independent assessment carried out by the Competition and Consumer Protection Commission (CCPC) on this issue. Until that is completed, I think we should put the proposed variable mortgage rates bill to one side. At the heart of this issue is competition policy and whether or not Irish competition rules have been breached. The only institution that can effectively determine this is the CCPC.
“Daniele Nouy, Chair of the ECB’s Single Supervisory Mechanism, confirmed to me in June that the issue of high variable mortgage rates is a matter for the CCPC to investigate. It is frustrating that this major competition issue has been allowed to rumble on for the past two years and the CCPC have still not investigated. I think the CCPC need to recognise the serious competition and consumer protection issues at play here and swiftly begin work on an independent examination.
“We should also be minded to the fact that the Irish Central Bank has said clearly that with the proposed bill we would be handing them powers that they do not want to exercise. There are also serious potential downsides from a competition perspective if mortgage rates are to be capped. These issues should all be considered by a CCPC examination of the situation.
“There is a serious lack of competition in the mortgage sector at the moment. In Ireland, there is approximately one mortgage provider per 920,000 people while in Northern Ireland there is one mortgage provider per 180,000. In Great Britain there is one mortgage provider per 700,000 people. This low competition is clearly evidenced in our high variable mortgage rates.
“We need to look at ways in which we can stimulate a more competitive mortgage lending environment. We should look at the French surety model where mortgage default risk is outsourced to third parties such as insurance companies in exchange for premiums. Such a model would help to reduce the mortgage risk weights that are currently very high for Irish banks; this would essentially lower banks funding costs.
“Resolving the variable mortgage problem requires innovative thinking and looking at the models employed in other countries. In the meantime, we need a proper investigation by the CCPC.”