Public Expenditure and Reform Minister Michael McGrath has been called on to back a bill to cap variable mortgage rates, similar to one he championed when he was in opposition.
The bill is due to be presented to the Dáil today by Labour’s Ged Nash, and comes just weeks before the European Central Bank (ECB) launches a series of interest rate hikes.
Some 200,000 mortgage holders in Ireland benefit from variable rates and are expected to face higher repayments when the ECB begins to raise its lending rate.
Variable mortgage rates in Ireland have been controversial as they are higher than in many other eurozone countries.
The legislation would give the Central Bank the power to force banks to cut their standard floating rates.
It would also give the regulator the ability to prevent banks from offering better mortgage deals to new customers than those offered to existing customers.
The Central Bank (Adjustable Rate Mortgages) Bill 2022 would require the Central Bank to conduct a quarterly assessment of the state of competition in the mortgage market.
This would look at variable rates, how easy it is to switch lenders, the cost of funds for lenders and the rates they charge.
If regulators decide there is a market failure, such as a lender charging too high a variable rate, they would be able to specify a rate to charge.
The legislation would also prohibit lenders from charging new customers lower rates than existing customers, in an effort to obtain new business.
Mr Nash, who is the spokesman for Labour’s Finance, said: ‘The European Central Bank’s series of interest rate hikes from July will hit nearly half a million beleaguered homeowners who are already in the worst of the cost of living crisis.
“Ireland already has the second highest mortgage interest rates in the EU, beaten only by Greece.
“That has to change.”
He added that even at a time when the cost of funds for Irish lenders was low, Irish consumers were hammered with variable interest rates on home loans ranging from a high of 4.5% to a low. by 2.7%.
“With interest rates set to climb, some analysts expect variable rate mortgage holders here to pay up to €400 more per month, even on a relatively modest €250,000 mortgage.
“The reality is that a young person or couple buying their first home will be pushed beyond their limits with these hikes while young families with years left on their mortgages will face unsustainable pressure on their finances due to of rising interest rates.”
When Mr McGrath proposed similar legislation while his Fianna Fáil party was in opposition, the then Attorney General indicated that if the legislation were passed into law it could be subject to constitutional challenge.
Mr McGrath’s bill also met with opposition from the ECB and the Central Bank of Ireland.
A spokesman for Minister McGrath said he had no comment.
Consumer campaigner Brendan Burgess, who has long pushed for lower floating rates, claimed Mr Nash’s bill would be scrapped as it would again be opposed by the ECB and the Central Bank.
He suggested replacing Mr. Nash’s bill with one simply prohibiting discrimination between new and existing customers.