Radical Action Needed to Prevent Another Decade of Mortgage Rip-Offs
10 March 2021
Spokesperson on Finance, Public Expenditure and Reform
- Central Bank figures mortgage rip still continues for families
- Withdrawal of Ulster Bank likely to push up rates further
- Caps on mortgage interest rates now required
Labour finance spokesperson Ged Nash has said that today’s Central Bank figures prove that the interest rate rip-off goes on, with Ireland now having the second highest mortgage interest rates in the EU – more than double the weighted average.
The Louth & East Meath TD said:
“The news that Irish mortgage interest rates remain the highest in the eurozone will be another hammer blow for customers after two weeks of bad banking news.
“In real terms this can stack up to an extra €80,000 over the lifetime of an average €300,000 mortgage. So not only are homeowners being fleeced when it comes to inflated house prices, they are then being hammered by excessive interest rates from banks.
“We know that 60% of mortgage holders could save €10,000 by switching, yet switching rates remain below 3%. There is a serious dereliction of duty on behalf of the government for failing to do anything useful to inform the public about the savings available from mortgage switching.
“However, we also know that the burden to switch cannot be placed solely on the consumer, especially with the low rates of financial literacy among vulnerable groups. If there is a market failure in the mortgage market, which there clearly is, then the State must step-in to regulate and address this problem.
“Caps on mortgage interest rates must now come into serious consideration as far too many people are struggling with the effects of the pandemic yet are still paying mortgage interest rates in excess of 3.5%. The reality here is that banks can borrow at 0% or less from the ECB, so there is absolutely no justification for sky-high interest rates.
“With the recent decision on Ulster Bank, there is a real risk that a further lack of competition in the Irish banking sector will see interest rates charged by dominant banks rise even further.
“Now more than ever we need to revisit the German style ‘Sparkassen’ model of small, community banks lending to personal customers and small businesses, and to consider turning 74% State owned Permanent TSB - with the remains of Ulster Bank - into a fully-fledged third banking force with a public bank focus. Like the savings banks of old, this could provide low-interest mortgages in line with EU rates.
“The evidence from the IMF and others is clear, that public banks lend more and more cheaply than private banks. The State must now step-in if we are to kick-start a real recovery from Covid-19, and a public banking model must be a key pillar of the forthcoming National Economic Plan.”