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Dublin: 11 °C Saturday 7 December, 2019

This bill might reduce your mortgage rate and be the government's first defeat

The new bill, if passed, will see the Central Bank get new powers to cap mortgage interest rates.

Image: Laura Hutton

FIANNA FÁIL WILL tonight propose legislation in the Dáil that will give the Central Bank of Ireland power to intervene in setting mortgage rates for customers.

Fianna Fáil Finance spokesperson Michael McGrath said for too long banks have been allowed to charge customers “unfair and unjustified” standard variable mortgage rates.

The proposed legislation will require the Central Bank to carry out an assessment of the state of the mortgage market.

If they reach a conclusion, under the terms of reference, that the banks are not being reasonable in the rates they are charging, the Central Bank will have the power to cap the rate being charged.

This could be the first defeat for the government, who have called the bill “seriously flawed”.

McGrath said some banks are “stubbornly committed to oppressive rates” which are impacting on the lives of hundreds of mortgage holders and families, many of whom he said bought in the boom and are in negative equity.

McGrath said some banks are charging rates that are “indefensible”.

Why should consumers pay 1% and 1.5% more than others in Europe?

He appealed to other parties and independents to back the proposal. It is expected Sinn Féin will support the Bill, with one source saying it is similar to policy they introduced last year.

This is the new way of politics. We weren’t lying when we said we would support something that we could agree on.

Labour Party Deputy Sean Sherlock said his party intends to support the passage of the Bill to committee stage.

In the spirit of the new dispensation that exists in Dáil Eireann Labour believes that this Bill, is worthy of further discussion at committee stage.There is no point in kicking back this important issue for further legislative scrutiny, it would be better if the bill proceeds to committee stage so that there is an opportunity at least interrogate the constitutional impediments and flaws that Minister Noonan has stated inherent in the Bill.

A senior government source said the government will oppose the bill and said it was “nakedly populist”.

The source went on to say the government did expect voting outcomes to “ebb and flow” in the government’s favour and against it, but added the Central Bank does not even want the new powers.

17/05/2016. Mortgage interest rates. Pictured (L t Source: Leah Farrell

On this issue, McGrath said it is important to note that ultimately it is the Oireachtas that decides what powers it is granted.

The banking inquiry highlights the need for all institutions, including the Central Bank, to be challenged on the powers it has and how they are exercised.

He said he spent a year and a half sitting in the banking inquiry where he heard criticism that the banks and the Central Bank were not being “robustly challenged” during the Celtic Tiger.

“The Central Bank is not infallible. Of course we will listen to their views and yes, we will engage with them,” he said.

Earlier today the Minister for Finance Michael Noonan raised potential constitutional difficulties with the bill.

20/9/2013. Culture Festivals Nights Source: Laura Hutton/Photocall Ireland

McGrath said this was surprising as when the legislation was originally debated in July of last year, no such concerns were raised in the Dáil.

Noonan said he would be proposing the bill be sent to a committee for pre-legislative scrutiny and hoped a Dáil debate could take place

This is the new reality this Dáil is working in… every deputy will have [a] decision to make… this is the new reality of how Parliament is going to work.

McGrath said he hoped the threat of legislation would apply “downward pressure” on the banks to lower their rates

A vote will take place on the bill tomorrow.

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