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Financial regulator tells banks: Stop raising variable mortgage rates

Matthew Elderfield has told banks that he will take action if they fail to comply with an instruction to stop hiking interest rates on variable rate mortgages.

Image: Nannette Turner via Creative Commons

THE FINANCIAL REGULATOR has told banks to cease raising  interest rates on customers’ variable rate mortgages – and threatened action if they fail to comply.

Matthew Elderfield said that the practice a contributory factor in the growing number of homeowners who are falling into arrears.

Elderfield said that the banks were raising the rates on such mortgages in order to recoup losses from cheaper tracker mortgages – which have a set interest rate. Reuters reports that homeowners on fixed-rate mortgages and those linked to the European Central Bank are causing near-record losses.

Elderfield met with CEOs of AIB, Bank of Ireland, EBS, Permanent TSB, Ulster Bank and KBC and warned that if they continued to raise such variable mortgage interest rates he would impose restrictions on their ability to do so.

The Central Bank does not have the power to place a cap on interest rates, but Elderfield has indicated that he will seek a public policy response to the issue if it is not resolved to his satisfaction, RTÉ reports.

Meanwhile the Central Bank Governor, Patrick Honohan, has called on the banks to increase their efforts in dealing with people who are in serious mortgage arrears, the Irish Independent reports this morning.

Elderfield is expected to make a speech on the matter later today.

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