The new Central Bank Governor, Philip Lane, has admitted that he does not have the power to force the Banks to reduce their mortgage variable rates.  Appearing at the Oireachtas Finance Committee on Tuesday he told members that it was not in the powers of the Central Bank to interfere in the contracts between borrowers and lenders.

John Lowe, The Money Doctor says that this shouldn’t come as a surprise to anybody because if the Central Bank had such powers they would surely have exercised them some time ago. It should also be remembered that the Banks were summoned to a series of meetings in the Department of Finance last year to discuss this very issue, but with negligible results.

T Ds and Senators were concerned that most of the rate reductions announced over the last year have applied to new customers only. Professor Lane conceded that this appeared unfair but that Banks have to be run on a commercial basis. The Central Bank can discuss the issue of getting more competition into the mortgage market and see if the process of mortgage switching can be simplified.

The average variable rate for new home buyers is currently 3.96%, with existing mortgage holders paying significantly higher rates. The average equivalent rate in other Eurozone countries is 2.05%, showing that first time buyers in Ireland are paying upwards of €2,000 a year more than their Eurozone counterparts.

The review of the Central Bank mortgage guidelines which is due to take place in November will also consider the thorny issue of rents. It also could mean another walkabout from Michael Noonan Minister of Finance to the main lenders operating in Ireland. His exercise last year yielded some results and perhaps it will again.

Pin It on Pinterest

Share This