THE MINISTER FOR Finance has said there is more that consumers can do collectively to make their savings go further but he acknowledged that banks are “undoubtedly enjoying very large profits at this point in time”.
Speaking to reporters at Government Buildings today, McGrath was asked if he believes Irish banks are profiteering at the moment by not passing higher interest rates back to savers via higher deposit rates.
He told reporters: “While we haven’t seen the full pass through to mortgage holders of the increase in the interest rates at ECB level, we’ve seen far less of a pass through to savers and depositors by means of the interest rate that they have been paid.”
McGrath added that he thinks it is important to highlight “what we can do collectively, ourselves as consumers” on this front.
He pointed out that households in Ireland have about €150bn on deposit in Irish banks at the moment but that only about €10bn of this is in notice accounts or accounts with fixed-terms where savers are paid a higher interest rate than instant access accounts.
“There is an issue there. And it’s a matter for customers themselves to decide whether or not all of their savings need to be in instant access or current accounts,” the Minister said.
Currently however, the rates offered by Irish high street banks for fixed-term or notice accounts is still far below our European peers.
According to Bonkers.ie, the best rate for someone in Ireland saving €500 each month in a restricted access account is 2% AER.
An analysis reported by The Financial Times earlier this month showed that Irish banks are currently the worst at pasing on rate gains to savers when compared to the UK, the US, the Eurozone and 18 other European countries.
The Minister also acknowledged today the “huge strain” that is being placed on mortgage holders whose mortgages are owned by non-bank entities (commonly referred to as vulture funds).
Some 60,000 homeowners whose mortgages are owned by vulture funds are unable to switch to high-street lenders and are stuck on rates of as high as 10% as a result.
At the beginning of August, The Journal heard from mortgage holders who are struggling as a result of mortgage interest rate hikes.
Since then we have had further responses from readers, many from people who had their mortgages sold to non-bank entities.
One reader told us how their mortgage went into arrears after a relationship breakdown and was subsequently sold to a non-bank entity.
They told us that their interest rate has recently increased to 8% and that they are not in a position to afford this after child costs and other outgoings.
They wrote: “I work part-time and pay my taxes. I pay for everything for my son. My ex does not contribute. Sometime I wonder if I did the right thing my buying my own property.”
The Minister said today that while the code of conduct on mortgage arrears and the consumer protection code applies to these non-bank entities, they do “have a different business model” and this is why “we are seeing interest rates of a much higher order” being charged on customers.
“I acknowledge that that is placing huge strain on many households at this point in time, but the same solutions, the code of conduct for mortgage arrears, those solutions need to be applied by the non-bank lenders as well,” McGrath said.
He added that he has already met with Pepper Finance and Mars capital and intends to have further meetings in the coming weeks both with the banks and non-banks.
Mars Capital was one of the biggest overseas buyers of Irish mortgages after the banking crisis.
The Minister said the forthcoming meetings will be used to examine what more can be done to help borrowers who are in distress.
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