Pressure for lower mortgage rates will increase as both Sinn Féin and Fianna Fáil plan to bring Bills before the Dáil this month that would give the Central Bank of Ireland the power to cap interest rates.
The political move comes despite two of the biggest mortgage lenders in the State – AIB and KBC Bank Ireland – announcing significant rate cuts yesterday for new and existing customers, and the financial regulator indicating recently that it does not want such powers.
The Bills are designed to drive down what both parties consider to be excessive standard variable rates.
It is not clear if the Government would support either Bill but, in return for its support of the minority government, Fine Gael agreed to recognise Fianna Fáil's right to bring forward Bills to implement its manifesto commitments.
It will allow such Bills that pass second stage to proceed to committee stage within 10 working weeks.
The arithmetic of the new Dáil gives the Opposition a real chance of having a Bill passed into law.
Sinn Féin's finance spokesman Pearse Doherty plans to publish his Bill in the "next couple of days".
This would give the Central Bank powers to cap interest rates for a three-year period and would cover all banks in the market.
Unjustifiable
“We’d prefer the banks to actually reduce the rates to European norms but in the absence of that happening, we have to do this,” Mr Doherty said.
Fianna Fáil’s finance spokesman Michael McGrath said he would bring forward a Bill within two weeks.
He said the current rates were “excessive, unjustifiable and not in line with the [banks’] cost of funds”. It would give the Central Bank the “power to intervene where a market failure has occurred”, he added.
AIB plans to reduce its standard variable rate for home loans by a quarter of 1 per cent from July 1st. Its rates will now start from 3.1 per cent in a move that will benefit 76,000 customers.
The bank has separate plans for its EBS and Haven subsidiaries which will be announced in the coming weeks.
The bank also introduced a €2,000 contribution towards professional fees for anyone switching their home loan to AIB.
KBC said it would reduce its variable rates from May 23rd by one-tenth of 1 per cent to between 3.1 and 3.2 per cent. It is also offering new fixed rates from as low as 2.99 per cent.
Neither Bank of Ireland nor Permanent TSB would comment. Ulster Bank said it "keeps all rates under review".
