Major banks to start cutting variable rates ‘within weeks’
THE major banks will start to reduce variable mortgage rates as early as next month, ministers told the Irish Mail on Sunday last night.
They also confirmed that details of a ‘consumer examinership’ will be unveiled along with rate changes after the Government’s ‘spring statement’, a form of mid-year mini budget, is outlined in the Dáil on April 28.
Taoiseach Enda Kenny said in the Dáil last week that banks had a moral duty to pass on lower interest rates from which they benefited.
The banks have come under increased pressure from all sides of Dáil Éireann to pass on to consumers the low interest rates they receive from the ECB. Variable mortgage rates here are the highest in Europe.
AIB charges 4.15%; Bank of Ireland and Permanent TSB were each charging 4.5%. Yet the cost of funds to the banks is 1.64%, 1.15% and 1.74% respectively.
Finance Minister Michael Noonan has also urged the banks to lower their rates in recent weeks, but has said he will not force them.
‘Kenny and Noonan would not be saying that they expect the banks to lower the rates unless they knew that it was going to happen,’ said a senior source from the Department of Finance.
‘There have been talks between the Government and the banks at the highest level to work towards lowering the rates. We will expect announcements in May.’
This will come after a ‘Spring Statement’ that will outline the pattern of tax breaks and spending increases the Government intends to announce before the general election. ‘The talks have been ongoing at this department,’ said a senior source at Finance.
‘Politically, there has to be something done and at the end of the day the banks will not resist the Government on this. We will also introduce a series of measures to provide a “con- sumer examinership” which will effectively end the bank veto on insolvencies.’
The Government is finalising plans which would see courts given powers to overrule banks when they reject proposals from borrowers with arrears.
Ministers are considering proposals to allow the Circuit Court to impose alternative arrangements to those sug- gested by banks. The Government is expected to announce its final mortgage arrears package at the end of the month, following the spring economic statement.
Coalition figures say the main priority is to keep families in their homes and the aim of the new measures is to encourage people ‘willing to work their way through their difficulties’ to engage in the personal insolvency system.
‘There have been talks at highest level’ ‘We will expect a May announcement’
One source suggested it would provide ‘another weapon to borrowers’ to encourage them to engage with their lenders.
While the reduction of the bankruptcy term from three years to one is being considered, it is understood the new court review system is seen as a more effective way of allowing people to stay in their homes.