Dáil Éireann debate -
Wednesday, 8 Jul 2015

Vol. 886 No. 3

Central Bank (Variable Rate Mortgages) Bill 2015: Second Stage (Resumed) [Private Members]

Question again proposed: "That the Bill be now read a Second Time."

Deputy Tom Fleming

I welcome the Bill devised by Deputy Michael McGrath. It offers and demonstrates the necessary mechanism to get us out of the ongoing impasse whereby the banks are continuing to mistreat and abuse existing mortgage holders. In concentrating on chasing new house buyers, the banks have slashed interest rates. However, approximately 320,000 variable rate customers are losing out and paying on average €2,000 per annum more than new borrowers. This unfortunate cohort of mortgage holders is trapped with its lenders and remains vulnerable to higher interest rates in future.

It is disingenuous of the European Commission to intervene in this matter by backing up the hard line taken by the banks and advocating that the banks which were bailed out by citizens be allowed to further profiteer on the backs of mortgage holders. The President of the European Central Bank, Mr. Mario Draghi, stated twice in 2014 that the ECB wanted the Irish banks to pass on cuts in lending rates but stopped short of contacting the banks to ask them to reduce their variable mortgage rates, which are the highest of the 19 members of the eurozone.

A variable rate cut would have several benefits for the wider economy. Most people have yet to see any increase in their disposable income. This is the main reason consumer spending on goods and services has been the weakest indicator of recovery in the economy. Given the many benefits that would accrue as a result of the enactment of the Bill, I will support it in the hope that it will be passed.

Deputy Mick Wallace

I happened to hear the discussion on Leaders' Questions this morning when Deputy Adams argued that the Central Bank, rather than the Government, was running the State. The Deputy asked whether the Government would legislate to give the Central Bank powers to act on mortgage interest rates and stand up for Irish mortgage holders and called on the Taoiseach to answer his question with "Yes" or "No". The Taoiseach replied that the answer was "Yes" on condition that the Central Bank requested such legislation. One could argue that this reply confirmed who is in charge and it is not the Taoiseach given his admission that he needed to receive a request from the Central Bank before he could act. This was a strange response and one which he may wish to reconsider.

Most people will agree that the mortgage crisis has not gone away. Irish banks are charging higher interest rates than banks in the rest of Europe, including Northern Ireland. The problem we have is that we do not seem to be able to tell them what to do.

Deputy Finian McGrath

I warmly welcome the Bill. Despite proposing new legislation and presenting alternatives, the Opposition is regularly criticised in the national media for not having options. This is welcome legislation which will be important for the 300,000 families affected by high variable mortgage rates, many of whom are suffering stress.

Despite the role played by the banks in recent years, nothing seems to have changed. Many of us are not impressed by and do not trust the senior officials in the banks. Many families, particularly young people, are suffering. People with a €200,000 mortgage on a variable interest rate are paying €992 more than new customers and €4,000 more than the European Union average.

The country faces a child poverty crisis. In 2008, the rate of child poverty stood at 6.3%. It now stands at 11.7% and a further 17.9% of children are at risk of poverty. These are shocking figures for a developed country. Many families are struggling to survive and pay their mortgages and they need our support.

Deputy Clare Daly

What really annoys people is the softly-softly approach adopted by the Government in its dealings with the banks. Its attitude contrasts sharply with the experience of mortgage holder and this gets to people because there is no justification for it. Double standards operate in this State, with those with influence being looked after while the vulnerable at the bottom are ignored.

I received a letter from a family living in County Roscommon who were informed by the sheriff that he would visit their home on 17 June last. The sheriff did not show up on the appointed date but subsequently appeared on 24 June with ten other people, including six gardaí in two patrol cars. As the father pointed out, there had never been any threat of violence from the family, which has gone through the courts in its efforts to have the matter resolved. The husband, wife and one child were present when the sheriff arrived. When the group was refused entry to the house, it moved off to take possession of another house in the area, leaving the family in a state of fear and dread. Where will these families end up? If the sheriff had got his way on the day in question, eight people would have been left without a home and the local authority would have been required to rehouse them.

The father wrote that while he knows people must pay back the money they owe, it is not fair when one sees the deals being done and favours given to those at the top. He stated that he and his family will have sleepless nights waiting, without a date, for the sheriff to return. I received an e-mail yesterday informing me that the sheriff had since returned and repossessed the house, leaving eight people without a home and at the mercy of the local authority. No one cared where they would spend that night and they were given a telephone number and told to make an appointment. This family was trying to resolve the issue. It is unacceptable that these types of events are taking place in Ireland today. This modest Bill would alleviate some of the pressure on some families. It is unacceptable that the Government seems to be satisfied that the banks are allowed to do whatever the hell they like.

Deputy John Halligan

I note the Irish Independent reports today that the European Commission has backed the stance taken by the banks in refusing to reduce variable interest mortgage rates. One can imagine how people across Europe feel about how the European Union treats ordinary workers. When one considers what the EU is doing to Greece and its role in the negotiations on a transatlantic trade and investment partnership, TTIP, it is little wonder people are losing faith in the European project. The European Union should stand by hard-pressed, ordinary Europeans.

What is happening is very simple; the banks are profiteering on the backs of hundreds of thousands of mortgage holders. This is incomprehensible to hundreds of thousands of people.

The Government stands by and gives all sorts of excuses that it cannot do this or that, is negotiating with the banks and cannot force them to do what they should. However, it can force many of those people who are caught in these mortgages to pay household charges or water charges by law. The Government will not help those people to deal with the banks that are ripping them off. The Government is completely underestimating the fury of a lot of people. They may be silently furious, but they are still furious at the way they are being treated by the banks. Having bailed out the banks years ago, they did not expect that the banks would come along and do what they are doing. Right across Europe, the rate is 2% less. In Northern Ireland the rate is 1.2% or 1.5% but here the banks are more or less telling the Government to take a jump, that they will do what they like and that they will not take any advice. That is about the size of it.

The Government needs to get its act together on this. The ordinary, everyday people of this country did not bail out the banks to be ripped off by them again. I finish by saying what was quoted. I am not too sure where it comes from, but the word used was "profiteering". It is profiteering by the banks at the expense of everyday, ordinary people. I cannot understand why the Government will not back the Bill. It has been saying all along what the banks are doing and getting away with. As Deputy Clare Daly has said, this is a very modest Bill and there is no reason for the Government not to back it and to bring in some sort of legislation to deal with the banks.

Deputy Ciarán Cannon

I thank Deputy Michael McGrath for proposing the Bill on an important issue affecting thousands of families. It is an issue our Government has been proactive in addressing. An Taoiseach and the Minister for Finance, Deputy Michael Noonan, have already acknowledged that the variable interest rates being charged by some of our banks are punitive and significantly higher than those being applied across the rest of the eurozone. In bringing our country from the depths of economic recession to the point where we are now firmly on the road to recovery, those very same banks relied completely on the support of our taxpayers to remain in business. However, there seems to be an unwillingness on the part of the banks to acknowledge that solidarity is a two-way street and that the support of our hard-pressed taxpayers needs now to be reciprocated at a time when many of them are struggling to pay their mortgages. Nobody is suggesting for a moment that our banks need to reduce interest rates to the point where their very financial viability is threatened, but with profits last year running into millions, there is very definitely some room for manoeuvre. Indeed, one can only expect that even more opportunity for interest rate reductions will present for banks over the next 12 months.

Earlier this year, the Minister for Finance requested the Central Bank to produce a report on interest rates and, following its publication, he met the six main mortgage lenders to outline his concerns. The meetings focused on the comparatively high standard variable rates being charged by the banks in Ireland. Following the meeting, the banks agreed to review their interest rates. To date, the response from the banks has been disappointing to say the least but I do not believe that the legislation being proposed by Fianna Fáil will provide us with a timely or, more importantly, sustainable solution to the problem. With little or no real competition happening in the Irish mortgage market, there is an onus on us all to create the kind of environment where foreign lending institutions are attracted to the Irish market. We have an economic recovery underway, we have a corresponding increased demand for housing and we have those high interest rates being charged by existing banks. It is reasonable, therefore, to expect that some of those foreign lending institutions are already contemplating entering the Irish market. At this point, the last thing we need to do is provide for State control of interest rates, which would shut down that kind of healthy competition overnight. In its report, the Central Bank outlined that there was a very real danger of extinguishing badly needed competition by imposing interest rate reductions. In fact, the report cautioned that any policy steps to interfere with the rates charged presented a very real risk of damaging side effects. In the last few days, the Central Bank has reiterated to the Department of Finance its stated policy opposition to setting and enforcing mortgage interest rates. In essence, this Private Members' Bill would give powers to the Central Bank that it simply does not want to use.

Bearing the above in mind, the engagement between the Minister, Deputy Noonan, and the banks is set to continue. He has made it abundantly clear that a follow-up set of meetings will take place with the banks in advance of the budget. He has also made it clear to the banks that the issue of a penal banking levy in the budget will be considered if sufficient progress is not made on this issue. As late as today, the Taoiseach emphasised that the option of a banking levy in the upcoming budget remains available to the Minister for Finance in the absence of real and substantial movement from the banks. It is not, therefore, the time to legislate on this issue as the effects of moves by the banks have not yet become clear and a review of the situation is ongoing. The Minister, Deputy Noonan, retains the right to act decisively in the budget if the banks steadfastly refuse to make any significant gesture in this area. The Taoiseach also remains open to introducing legislation if the Central Bank deems it necessary and, perhaps more importantly, wise to do so.

The Government remains acutely aware of the pressure mortgage holders are under and is being very proactive in working to reduce this pressure. However, the requirement to be proactive does not and should not allow one to set aside all wisdom and engage in knee-jerk and potentially damaging actions which could exacerbate rather than solve this problem.

Deputy Bernard J. Durkan

I am glad to have an opportunity to speak on this particularly important and sensitive issue. I thank Deputy Michael McGrath and Fianna Fáil for bringing the issue before the House. I do not necessarily agree that the Bill is a means to resolve the difficulty we have. We all recognise and must recognise the degree to which borrowers have been subject to very traumatic situations over the last number of years. It has not got any better with the passage of time. As a matter of fact, it was always a situation that was going to get worse with the passage of time. We need to empathise with those who are in difficulty and are paying higher interests rates than their peers across Europe. The banking fraternity must note this and take the appropriate action, which they can do. Let us not forget one thing. We were told for many years before the economic collapse that everything was controlled from Brussels. We could not control interest rates and we could not control economic policy because it was all controlled from Brussels. Here is a situation where in Brussels and similar countries the interest rates are lower. It is only fair to expect that the rates would be passed on by our banks to borrowers. I recognise fully what Deputy John Halligan said in relation to the fact that the banking fraternity was bailed out by the people of this country. Compassion was shown to the banking fraternity at great cost to the people. A little bit of compassion, understanding, recognition and movement would be greatly appreciated now.

I have listened to a great deal of rhetoric inside and outside the House over the past couple of years on what should be done in particular situations. It is hugely important that we as public representatives advise the public in their interests and not in ours. We should advise in the interests of the families and not in our political interest. It is very easy in the interest of political expediency to say to someone "Do not pay" when somebody else has got a concession. The fact that somebody else got a concession we do not know about and do not have the intricate details of makes it very easy to say that to someone who might well find themselves in a difficult situation as a result of following the advice we might give. I express a word of caution to those who might be advised by those who say they do not have to do X, Y, or Z as other people have got away with something and they are entitled to the same thing. We must be very careful about that and recognise that the people we might advise and that some financial advisors might advise might be the first to be hurt.

We must be reasonable and recognise the situation that presents itself. We must also recognise that there is an extent to the burden that a family can bear. A golden rule should apply whereby borrowers should be expected to pay the amount that is within their capacity to pay. It does not make any difference what the previous circumstances were when the lending institution issued the loans or whatever the case may be. Following a number of years of difficult circumstances during which people have been trying to raise their families and meet their commitments to the best of their ability, it is extremely important that recognition is given to the fact that roughly one third of one's disposable income is normally regarded as being acceptable in what one would be expected to make in repayments. After that, there are many options available. To be fair to most of the lending institutions, they are prepared to negotiate, to enter into an arrangement and to listen to reason. Occasionally, one or two go offside and in those circumstances it is unfortunate that they do so. We have to live with our memories and there are good ones and bad ones. We have had many bad memories in recent years. I am not going to attribute those to anybody, not to the Opposition nor anyone else. It would not be fair to do so. The circumstances in which we found ourselves as individuals and as a nation need to be recognised and there needs to be a response from all the contributing parties. In this particular case, it is the banks. The Minister and the Taoiseach have already engaged, to a fairly considerable extent, with the banks and I believe their influence will eventually prevail.

Deputy Anthony Lawlor

I welcome this legislation and the debate on it enables us to discuss openly and transparently the issues people have in repaying their mortgages, whether they be on a variable, fixed or tracker rate, although the Bill only deals with variable rate mortgages. I would view the Bill as a tool to control interests rates. Sadly, this legislation is 15 years too late. If it had been enacted 15 years ago, even though Deputy Michael McGrath was not a Member of the House at the time, and if the Deputy had suggested this proposal in some form, we might not have ended up in the situation in which we are in. It might not have come to pass that banks loaned money to people who did not have the potential to pay back their loans. We had an opportunity in those days to ensure banks charged an interest rate that borrowers had the capacity to pay, rather than them selling 100% mortgages and other schemes that were available at the time. That is something we should have done in the past.

I am always wary of politicians stepping into an area where the Central Bank has a role. The Central Bank has sufficient legislation in this area. I have always believed the Central Bank and those involved in it should be vigilant with regard to banks and the interest rates they charge. The Minister has met the six major lending agencies in the recent past. The Taoiseach has said that if there is a need for legislation coming from the Central Bank there is no problem with it being introduced. The Minister said that if there is not some give by the banks voluntarily on this issue that during the budgetary process a levy can be put on the banks to curtail the current excessive interest rates.

There are many variables in the proposed legislation and I do not like variables. For example, there is a reference to "lenders' reasonable profit expectations". It seems that would be a decision by an individual as to what would be an expected profit. There does not seem to be a cross-European guide as to what profit a bank should make.

To increase competition within our banking sector, we must allow customers to be able to switch provider and to do so much more easily. That would drive down interest rates because there would be competition within the banking sector and it would allow customers not only to switch providers within Ireland but also within Europe. Borrowers should be allowed to switch to banks within Europe who can take them on and who charge a lower variable rate. The Competition and Consumer Protection Commission should examine whether banks are allowing their customers to switch provider and this should be possible across Europe. We come across cases where borrowers are paying different variable interest rates and if another bank is offering a lower rate, those borrowers should be allowed to switch to it. Perhaps legislation should be brought forward specifically to allow that to happen and make it easier for people to switch providers.

The Government is using a carrot approach in encouraging the banks voluntarily to reduce rates but there is the potential for it use a stick approach which could be either a budgetary levy imposed on the banks or if the Central Bank requests it such provision could be introduced without any difficulty.

I approve of certain points in Deputy Michael McGrath's proposed legislation but I cannot accept it as there is too much variability with respect to other points. I would rather if it included some fixed measures. I approve of the provision that we should examine the matter of allowing customers to be able to switch their mortgages and that would increase competition within the banking sector.

Deputy Michelle Mulherin

I welcome this Private Members' Bill that Fianna Fáil has brought before the House. It is important that we never lose focus on what is happening with the banks, the interest rates they are charging and the impact that is having on mortgage holders with standard variable interest rates. When it comes to banking in general whether it be one's business or one's credit card, we know that all these interest rates are very high and impact on people, whether it be on their daily lives, their families or their businesses.

I note that Professor Pat Honohan during a recent attendance at the Oireachtas finance committee said: "Since the crisis banks' standard variable interest rates have moved higher than previously, relative to their cost of funds and, arguably, higher than a fair-minded customer might have reasonably expected." However, he said he did not agree that regulation was the way to go.

The reality is that the standard variable interest rate for our mortgage holders is, on average, double the European standard. The other reality is that unless banks are prepared to do something, this is a very serious conversation and debate we must have. The Government is doing everything it can to restore the benefits of our economic recovery to the people of this country, in particular the workers. We increased income tax thresholds and reduced income tax rates, but for every percentage gain made for people the banks have taken it back with the other hand. They are undermining the good work of the Government. The banks may be getting back to normal, and we want a normal functioning banking system with which we do not have to interfere. We are an open market economy. We must acknowledge certain realities of business and banking, but it cannot be business as usual in this country. We have a substantial number of people in mortgage arrears who have not been sorted out yet. We have businesses that are doing the very best they can to keep their head above water and interest rates make a big difference to them. We also have the standard variable rate mortgage holders who are under a great deal of pressure. Notwithstanding all the good news about job creation, much of that has yet to bite. The impact and the benefit of all of that good news story has yet to play out so we are not back to normal. We all know about financial emergency measures that have been taken in regard to public sector. Many people have endured financial emergency measures package legislation. We would be perfectly justified, even for a window in terms of time, to impose such measures upon banks, in effect, to regulate them if they do not do what banks should do.

If they do not step up to the plate, we will not get a properly functioning economy that will allow people to have room to breath, to spend and to raise their families and that will allow businesses to operate properly. It will not be in their interests either, so we need to go the full hog, so to speak. We are not living in normal times. The proposal in this legislation has merit for consideration if the banks do not do the right thing in this regard.

Until everything is normal in economic terms, and all our citizens know that, we would be justified in intervening with regard to the banks. I understand the argument that we want to encourage that by way of competition. Clearly, the prevailing competition is leading to this situation, and it is not sufficient.

I welcome the fact that the Minister engaged with the six main mortgage lenders in May. A plan of action was agreed that they would consider providing more options to people on standard variable interest rate mortgages in terms of how they might reduce their monthly payments, whether by signing up to a lower fixed interest rate, changing or whatever. I have confidence in the Minister, and we should allow this process to continue. The banks have until the end of July, but we have to apply a litmus test. If it is not working for people, we should not entertain the banks any longer. We have to take a very hard line.

I welcome the Minister's statement that we will either get the banks through a penal banking levy in the budget or, through powers of the Central Bank, regulate interest rates. We are living in extraordinary times. The people we are trying to help are feeling the pain. The banks were bailed out on the backs of taxpayers. Working people in this country have paid a substantial price, and they will continue to pay for years to come. They saved our banking system, which will allow us to get back to normal. The banks owe it to them to give them a break. Instead of lining their shareholders' pockets, they should take a step back from this, and if this is the course of action the Minister has to take in due course, I will be supportive of it. We have been waiting a long time for the banks to do the right thing and if they are not shown to do the right thing when it is tested, we must take action. That is the course of action I envisage.

Deputy Noel Harrington

I thank Deputy McGrath for introducing this Private Members' Bill and I welcome the opportunity to speak on it. There is a problem with high standard variable interest rates, which are punitive on bank customers. The problem has to be resolved and a solution found. The Bill has been brought forward as a measure of good faith to force the banks, through the Central Bank or whatever mechanism, to reduce interest rates under certain conditions. That sounds like a very simple method of forcing the Central Bank, which is answerable to the Department, to interfere with the setting of standard variable interest rates but I believe competition in the market will deliver what the consumers wish for in this instance. It is a mistake to force the Central Bank which has stated that it is unwilling to interfere in the setting of interest rates to do this, and there are many reasons for that. When the economy went south, many of the banks left, including Bank of Scotland, and competition became less of an issue in the Irish banking sector. We have a few large players here who are dictating the market. I am concerned that if we force banks to lower interest rates in one sector, there is an inevitability in the current market that they will get it somewhere else. For example, they may get it in the commercial sector or other areas of operations in the banking sector. That may cost businesses and commercial activity unduly, and make it uncompetitive to obtain funding to get the economy back on track.

Our economy is set to grow in the coming years by between 3% and 3.5% per annum. That is an attractive area in that international banks would look at Ireland as a potential jurisdiction for entering the market. That fact must be considered. It is not happening quickly enough, but I believe it is being considered. There is significant potential to attract other financial institutions to this country to participate in what is a very attractive market. If consumers were given that choice, I believe they would respond positively.

Contrary to what has been alleged, it is not that a hands-off approach is being taken or that we do not realise the full extent of the problem. The Minister has met with the banks on several occasions. He is considering what they said, and their report, and he will react accordingly. I presume he will meet them again before the budget is announced in October but interfering, against the advice of the Central Bank, with a centralised banking area in terms of standard variable rate mortgages is a dangerous concept and also in terms of precedent. We have interfered in regulatory authorities in the past and it has not served us well.

I assume Deputy McGrath would also believe that competition will deliver here. It may be too slow, but I suggest that a growing economy would deliver the competition this market deserves. I welcome the Bill but I believe it is trying to create a solution in the wrong direction.

Deputy Jerry Buttimer

I commend Deputy McGrath on introducing this Bill and I welcome the debate. The issue is one of contention and emotion because it relates to the ability of people to pay and, predominantly, to their family home. In terms of having a healthy, functioning banking system, and mindful of the fact that we are now seeing banks return to profitability, they have a duty to engage with customers, and to be practical about that. It is about ensuring that people pay a lower rate in terms of these mortgages. I am mindful of the debate at the banking inquiry in recent weeks. The legacy of that financial crisis is on the floor of the Dáil tonight.

I was struck by the remarks of Professor Honohan to the Joint Committee on Finance, Public Expenditure and Reform in May when he stated:

Given the wording of the [standard variable rate] SVR contract, I assume that borrowers agreed to [those] SVR terms largely because they trusted the banks to behave in a fair manner with regard to interest rate adjustments.  And for decades it seems that this trust was, by and large, not misplaced.  Is this still the case?

That is the fundamental question. Is this the case, and are the banks acting in a manner that is fair and just?

I welcome the fact that the Minister and the Taoiseach have engaged with the banks, and Deputy McGrath has put forward a different proposition in his Bill, but if we consider what the Taoiseach and the Minister prefer in terms of the two pillars of the penal banking levy or consideration in terms of the power to be given to the Central Bank to regulate interest rates, that poses the question of what is the best approach to take. Deputy Lawlor spoke about the carrot and stick approach. Deputy McGrath wants a different approach. Professor Honohan does not necessarily want the Central Bank to have that power. The Minister speaks of competition, as does Professor Honohan, and we all want competition in the banking profession, but we also need to see a banking profession working with people and giving them a lower variable rate.

History will show that the banking system failed the people over the past decade. It led people down the wrong route. We all remember the offers that came in the post of money to extend one's house, change one's car, go on a second holiday, buy a foreign property or upscale one's house.

We all know what happened. There was no one driving the car. All of the people in it were in the back seat partying. These were the people in charge for 14 years.

We are all agreed on the need for the banks to lower their rates and allow people to pay less. We are all agreed on that. At the same time, the philosophical question of who should set the interest rate must also be discussed. Deputy Durkan is correct that this is not about politics or political expediency: it is about doing what is right for the people. We have all sat in the offices of banks and in our own offices with people who were crying because their homes were about to be repossessed. We have also sat down with members of the banking profession and pleaded with them not to intervene and take away people's homes.

There has been much talk about politicians who were in the driving seats having their pensions restored by way of changes to the FEMPI legislation. I hope we do not go down that road. In my opinion, that would be grossly wrong. I hope we find a mechanism by which those concerned, the chosen few, cannot be given back their money.

What we are discussing tonight is the relationship between the banks, the taxpayers who bailed them out and the banks' customers. The banks should not be returned to profitability on the backs of, to use a phrase I use frequently, an gnáthdhuine, the ordinary person. They should not be allowed to do that. I welcome that the Government is committed to ensuring this situation is redressed either through the budget or prior to that.

I am aware that my time has expired. I am very passionate about this issue. I know that Deputy McGrath's motivation is not political and I hope that he will not call a vote on this tonight. We are united in this in terms of our end game.

Deputy Michael McGrath

I hope the Government will not call a vote on it.

Deputy Jerry Buttimer

I hope that Deputy McGrath will accept the Government amendment.

Deputy Michael McGrath

We are discussing a Bill, not a motion.

Deputy Jerry Buttimer

We are united in our aim on this issue. The banks must work with people. This is about people's lives, their dignity and their families. I hope the banks will work with people.

Acting Chairman (Deputy Joe O'Reilly)

Deputy Kitt is sharing time with Deputies Aylward, Troy, Keaveney and Browne.

Deputy Michael P. Kitt

I commend Deputy Michael McGrath on the introduction of this legislation, which follows on from a Fianna Fáil Private Members' motion moved in the House on 31 May. I recall Deputy McGrath mentioning at that time that a person on a €200,000 mortgage over 20 years was paying up to €1,000 per annum more than that which would be paid, based on an offer, by a new customer. According to Deputy McGrath such a customer could pay €6,000 more than a person on a tracker mortgage of the same amount. These figures show the unfairness of the current situation.

I am glad this Bill is being discussed following the passing of the deadline within which banks were to provide meaningful reductions in monthly mortgage payments. There has been no significant action on the part of the banks to provide any meaningful reductions. The banks have sought to deny the existence of a problem and have fobbed off customers with minor changes to the rates. I understand that current data show that the average standard variable rate in Ireland is 4.6%. Our MEPs have spoken out on this issue, particularly former Minister of State, Brian Hayes, who said that Irish house buyers are being ripped off by the banks. Our MEPs have examined the situation in the eurozone area where the average variable mortgage rate is 2.45%. We need a thorough investigation into why current standard variable rates do not reflect market conditions.

In other European Union countries there is a low interest rate environment. The bottom line is that in Ireland banks are still offering variable rates of over 4%. We have heard all of the excuses before in regard to Ireland's home loans rates, which are more expensive than in other European Union countries, with reference to the higher cost of funding and the effects of tracker mortgages. I do not think anybody could accept the excuses that have been given up to now. The banks have made mistakes and are now seeking to punish those who borrowed money from the financial institutions. Variable interest rate mortgage holders are now being charged interest rates that are three times those being paid by tracker mortgage holders.

The Central Bank figures show that approximately 240,000 mortgages were restructured by the end of 2013. The Simon Community have raised this issue in the context of homelessness and in this regard pointed out that 37,000 households are in mortgage arrears of two years or more. That there are 300,000 households on standard variable rate mortgages is an indication of the seriousness of this matter. These people are not benefiting from the current low interest environment that exists in Europe.

This Bill requires the banks to treat new and existing customers equally. We should not have a situation whereby banks have a policy of making certain offers available to new customers only. That is very unfair and it discriminates against existing customers. Three banks, KBC, Ulster Bank and Permanent TSB, currently charge the same variable interest rate of 4.3%. AIB charges 3.9%; Bank of Ireland charges 4.5% and Danske Bank charges 4.95%. A Bill that charges the Central Bank with responsibility for monitoring the level of competition in the mortgage market and the fairness of the rate to be charged should be welcomed. I believe it would act as a strong deterrent to banks charging excessive rates.

Sadly, even today the European Commission backed the hardline being taken by Irish banks in their refusal to slash variable mortgage interest rates for tens of thousands of families. Effectively, what the Commission is saying is that our bailed out banks should be allowed to profiteer on the backs of mortgage holders. European Union officials know that the mortgage interest rates here are too high but are warning against any moves that would undermine financial sector stability.

Many people are wondering why letters were sent to people who are not Bank of Ireland customers informing them about the availability of lower mortgage interest rates for Bank of Ireland customers. That information was wrong, in particular in respect of former ICS Building Society customers who are now Bank of Ireland customers. Bank of Ireland customers did not receive letters informing them about new rates for existing customers, the availability of a 2% cash back offer or a €4,000 cash back offer on a mortgage of €200,000. There are many questions to be answered in regard to the reason these letters were sent to people who are not customers of Bank of Ireland.

Deputy Bobby Aylward

I commend my colleague, Deputy Michael McGrath, on the introduction of this Private Members' Bill. During my recent by-election campaign I spoke with many people in my constituency of Carlow-Kilkenny about this issue. The distress on the ground is palpable. The most obvious question that occurs to me and requires an immediate answer is, who in government is going to take action and stand up for these 300,000 standard variable rate mortgage customers. These customers are being charged way over the odds at rates that we now know are double the levels of any other country in the eurozone.

The Taoiseach continues to pass the buck between the Central Bank and his Minister for Finance by deflecting the issue until October's budget. Yesterday, the European Commission continued the trend of backing the banks over the ordinary mortgage holders when it came out against any intervention by the Central Bank in regard to the variable rates that are being charged.

The Central Bank, which has a clear role in consumer protection, is not affording appropriate focus on an individual consumer level. What is worse is that the Government appears happy to accept this position and sit on its hands awaiting a request from the Central Bank to legislate rather than take appropriate action. This was typified by the Minister for Finance ludicrously stating when in Brussels yesterday evening that the banks had moved sufficiently. The reality is that the response from the banks has been totally inadequate, with only two of the six lenders having made minor reductions to their standard variable rates. The Minister should revert to the banks immediately and tell them that their response has not been adequate.

It is obvious that they have fundamentally neglected to deal with the key issue of variable-rate mortgage pricing.

This Fianna Fáil Private Members' Bill represents a real opportunity to deal with the variable-rate mortgage crisis. Mortgage repayments generally represent the single largest financial outgoing for a household. Families have been forced to watch in absolute frustration as their mortgage rates have steadily risen. Effectively, they are trapped in a situation which is costing them hundreds of euro a month. This progressive legislation can make a significant difference to more than 300,000 households across the country. The taxpayers of this State have done their duty by the banks. It is time now for the banks to give something back, and the coaxing by the Minister and Taoiseach clearly is not working. What is needed is strong action. I implore the Government to accept this Private Members' Bill and thereby help the people who are caught in this situation.

Deputy Robert Troy

I welcome the opportunity to contribute to the debate. It is interesting to listen to Government Members likewise welcoming the chance to debate, discuss, deliberate and have a serious conversation on these issues. I noticed, however, that very few of them used the word "action". In fact, some of those Members did not even realise we are debating legislation when they asked us not to press a division later tonight. They talked about this issue not having to do with politics. The reality, of course, is that politics is about making choices and introducing policies that will make society better for all the people who live in it.

The time for debate, deliberation and serious conversation was earlier this year, when my colleague Deputy Michael McGrath put down notice of a motion. I acknowledge that on foot of that notice of motion and after considerable pressure was brought to bear on him, the Minister, Deputy Michael Noonan, agreed to haul in the banks to discuss the issue. That display was designed to show he was a man of action who would deliver results. Some of us thought the people in charge of the banks must be quaking in their boots at the Minister's arrival in their office. We realise now, with the deadline of 1 July having come and gone, that they were not quaking in their boots at all. In fact, they probably laughed at the Minister when he left their office. They certainly took no heed of the pressure he put on them. Two of the six financial institutions have taken no action at all. ACC introduced a miserable reduction of 0.25 of a percentage point, and KBC's response was likewise absolutely minimal.

When my party leader questioned the Taoiseach on this issue last week, the latter seemed to be under the impression that the changes could only come about on 1 July. He apparently did not realise that this was the deadline by which the banks had to report back. The Minister, Deputy Noonan, has the reputation of being a very competent, capable and able Minister. However, he did his reputation no good last night when he made his statement in Brussels that progress has been made on this issue. Progress has not been made and he is fooling himself if he believes it has. He talked about a reduction in fixed interest rates. Does he not realise that switching to a fixed rate is not something every mortgage holder can do because it ties them in for a two-year period? He referred to people switching their mortgages from one financial institution to another. Again, this is not something all homeowners can do, perhaps because they are in negative equity or do not have the resources to pay the solicitor's fees to effect the transfer.

It is interesting to hear Government Members talk about being reluctant to intervene with the Central Bank in a context in which that body has not sought any new legislation or powers. Yet the same Members constantly criticise the previous Administration for not intervening with the Central Bank at particular times in the past. Some Government speakers suggested that in the event that the Central Bank does look for new powers, this legislation might be good enough after all. All of this raises the question of who exactly is running the country and making the decisions. The Minister and his colleagues are in the privileged position of being able to enact legislation that can make this country a better place for citizens. What is interesting to note at the same time is the following statement by the former Minister of State at the Department of Finance and now MEP, Mr. Brian Hayes, last February: "We can now say with certainty that Irish homebuyers are being ripped off by banks, particularly when you consider the eurozone average variable mortgage rate which is 2.47 per cent."

Compare the treatment that Irish taxpayers who are struggling day in and day out to keep a roof over their heads, put food on the table and send their children to school have met with at the hands of the banks, with no intervention by the Minister, with the treatment that certain well-heeled and well-connected people are getting from the Irish Bank Resolution Corporation. The contrast is quite alarming. That so many Government Members chose to contribute to this debate is a clear sign this is a real issue for their constituents. We have been told that if nothing happens by budget day, the Minister will intervene. People are being left to drown in the same swamp they have been drowning in for several years until budget day when, apparently, they might be thrown some type of lifebuoy.

The Minister would not listen to us when we urged him to remove the bank veto on personal insolvency arrangements. He ignored our warning regarding the devastating consequences of withdrawing mortgage income supplement. He has since had to row back on some of those issues. I implore the Minister tonight, on behalf of the people I represent in Longford and Westmeath, to wake up and smell the coffee. He needs to introduce legislation. The banks cannot be left to their own devices, as they have proved in the past and continue to prove in the present. The time for discussion, debate, deliberation and serious conversation is over. The time for action is now, and the Minister is the man who is in a position to ensure it is taken. I implore him to do so.

Deputy Colm Keaveney

In late February of this year, shortly before Fianna Fáil moved our motion on the same issue that is dealt with in the legislation before us this evening, I met with a constituent in my office. For the purpose of this debate, I will call him Shane. The Minister seems to find that amusing, but it is he who is letting the banks gouge ordinary families. If he thinks it a laughing matter that I should raise the circumstances of a constituent, it is merely indicative of the bubble in which he lives when it comes to the distress being experienced by families as a result of the mortgage interest rate crisis. The Minister has turned his back on all those families.

Shane is on a variable rate mortgage. He and his wife struggled through recent years without complaint and were paying their bills, including the new ones levied on them by this Government, notwithstanding the promises given prior to 2011. Unlike many others, Shane and his wife were fortunate enough to stay on top of their mortgage payments. However, the financial strain of paying this and other bills leaves them with nothing at the end of every working week. As a consequence of the ball and chain that is the interest rate on their mortgage, they are unable to save or enjoy a night out and have not had a weekend away with their children in the past six years. They are, like many other families, simply surviving in order to pay the bank. In effect, the bank owns their life. In addition, as I said, they must bear the costs that have been imposed by this Government, such as water charges and local property charges. There is nothing left over for their family at the end of the week.

Their neighbours in the same estate have enjoyed falling rates over the past few years as their trackers fell in line with the ECB base rates. New neighbours in the estate who bought at the bottom of the market are also enjoying the lower rates being offered to new home buyers. These families have been afforded, through interest rate cuts and lower rates, some small financial relief that has allowed them to enjoy a quality of life. However, that simply is not the case for the person to whom I referred.

Shane is a law abiding and productive citizen, who wants nothing extraordinary. He wants a small bit of wriggle room to get his financial affairs in order and to spend some money on his children. He is horrified at the idea that he will approach this September facing costs of up to €400 for uniforms alone for each child. We are asking the Government to intervene, as we did earlier this year in a motion tabled by Deputy Michael McGrath.

Shane’s fury is also a result of the knowledge that the banks here are levying interest rates significantly greater than the European norm. His anger was directed not only at the banks, but at the political system he believes has abandoned him. The Government has hidden behind the words of the Commission. It asked the Government to burn bondholders and it would not, but if it asked it not to interfere with interest rates it would not. Shane is incredibly cross and I do not agree that he has any right not to be so. The front page of today’s Irish Examiner contained, in large letters, the news that the Cabinet had backed down on interest rates. Using a European Commission report as a convenient cover, the Cabinet declared that there was nothing more it could do apart from tolerate a second attempt by this party to do something for struggling families.

The Government has been as sensitive as the European Commission to the dictates of the market, above the interests of society or having a just approach. Financial institutions have been gouging families. The Minister, Deputy Noonan, I regret to say, informed the newspaper that the needs of the market meant the banks must be permitted to do whatever they wish and that social concerns could not override those concerns. That is the attitude of this Government, Fine Gael, the Labour Party and the European Commission. It is essentially the same as any 19th century Victorian commitment to approaching the economy.

The advice of the Minister, Deputy Noonan, to variable mortgage rate holders, offered on the front page of the Irish Examiner, is as helpful as the Labour Party’s advice to lone parents who are unable to afford child care, that is, that they should simply bring their children to work or work and live to provide for a bank. The Minister, Deputy Noonan, and Deputy Tuffy, who offered that advice on behalf of the Labour Party, are evidently detached from the realities faced by families who are struggling to get from one week to another and to survive until Friday to be broke on Saturday. People are living and working for banks, and are being gouged by them.

The Minister, Deputy Noonan, advised those on variable mortgage rates to move to fixed rates, and observed that be believes we are at the bottom of the interest rate cycle. Considering that we are as close to the zero bond as makes no difference, this observation is about as profound as noticing that water is wet. The Minister must know from the reports he receives on the banking sector that his offered advice is worthless. He advises mortgage holders to switch providers in order to secure better rates, but the switcher market is largely a mirage. The main lending banks have informed the Oireachtas Committee on Finance and the Public Service that very few such transactions are completed. His advice that people move to fixed rates ignores the fact that existing customers are simply not being offered the fixed rates that are being offered to new customers.

There is a gross inequality in the market, with existing customers being held captive by their banks on higher rates while new customers benefit from lower rates. The Government, in particular the Labour Party, has made a great boast of being champions of equality. However, it will come as no shock that the reality of people’s lives involves struggling to get from one week to another. We are far from equality when it comes to dealing with the banks.

The Bill provides an opportunity to rectify a glaring inequality that has trapped more than 300,000 mortgage holders and their families in servitude to banks. It would also protect mortgage holders who have had their mortgages sold onto vulture funds, something through which we are now trying to navigate. We will also take the opportunity to ease the burden on families and grant them some financial space so that they can participate as active citizens in their communities and have some flexibility to protect their domestic circumstances and provide for their children. I fear the latter will not maintain itself because in defence of the European Commission, it has been convenient in terms of giving the Government significant cover. The Government parties now have an exit strategy to walk away from doing the right thing.

How long will the Deputies opposite be content to sit waiting for the cavalry of banking competition to turn up? Will it be in a year, two years or even five years? There is no sign of it. How much damage will have been inflicted on the lives of ordinary people who are supposed to have the expectation that competition will enter the market and resolve the situation? That will not happen. Politics and legislation will resolve the situation. It is easy for the multitudes of landlords in this House, including those on the Fine Gael and Labour Party benches, to be patient because they are benefiting from a boom in rents. Families cannot be patient because they are at the end of the road. They can no longer tolerate the situation, and rightly so because the mortgage market in Ireland has failed.

Intervention is needed. This Bill is needed. It is a measured, moderate Bill which simply brings some equity to the mortgage market. It will improve the lives of more than 300,000 families who deserve to have a break and wake up without being gouged by the banks. I appeal to the Government and to the Minister to support the Bill and to stand up to the Commission. The Government, not the Commission, runs this country. It has the chance to represent the citizenships and its interests. It should stop the banks gouging ordinary people who are struggling to get from week to week, who cannot provide for their children and whose domestic circumstances are a constant struggle. A laissez-faire approach to this will result in only more misery. Nothing will be resolved unless we have political will and action.

Deputy John Browne

I support the Bill put forward by my colleague, Deputy Michael McGrath, which aims to end the scandal of banks overcharging customers on standard variable mortgage rates. As Deputy Keaveney has pointed out, 300,000 mortgage holders are paying the highest rates across Europe. I thought the purpose of the European Union was to have uniformity. Why should mortgage holders in Ireland have to pay rates of at least 2% above comparable rates in other EU countries?

The Taoiseach told us today that the Central Bank did not request legislation, but its attitude leaves a lot to be desired. It said it does not need legislation, yet it has no clout to force the banks to make proper reductions in interest rates.

Piecemeal reductions, which are really irrelevant, have been made by the banks in recent months.

Fianna Fáil has consistently highlighted over the past two years how the banks are ripping off their variable rate mortgage holders. As it stands, up to 300,000 mortgage holders on variable rates pay hundreds of euro more per month on their mortgages. Fianna Fáil put this issue firmly on the agenda at the end of March, with a motion on the subject of the rip-off variable rates being charged. Since then the banks have sought to deny the existence of a problem or to fob off customers with minor changes to their rates. The Government has been totally lacklustre in its response to the crisis and has failed miserably to convince the banks to reduce the punitive variable mortgage rates. This clearly indicates the Government really does not have the interest in taking, or is not bothered enough to take, decisive action. If the Minister came to my county, and I am sure it is the same in his own, he would see we receive countless representations from people throughout Wexford who are stuck on variable mortgage rates. They are forced to pay up to €500 per month more compared to new mortgage holders with the exact same mortgage but with tracker rates. This is unacceptable when one considers interest rates are at a record low level.

Yesterday I received an e-mail from someone living in Monamolin in Wexford in which he states he hopes I, and my colleagues, will continue to highlight the issue. He states the recent response by the banks to the call from the Minister, Deputy Noonan, for lower rates has been deeply disappointing. He states his mortgage rate with Permanent TSB looks like reducing from 4.5% to 4.3%, which he describes as a miserly reduction that works out at approximately €30 off a monthly payment of €1,500. He describes it as an anti-climax and an insult to customers of the bank. He states people in his circumstances have no option to switch to another bank or to a lower fixed rate. He states they have no option. We receive letters such as this on a regular basis from customers throughout our constituencies. These people do not live in mansions or in nine or ten bedroom houses. The man who sent the e-mail states he lives in a bog-standard bungalow which he purchased at the end of 2008. He and his family are being put to the pin of their collar to meet the repayments on their mortgage. All they are looking for is a reduction comparable to other EU countries.

It is important that the Taoiseach and the Minister take on board what the ordinary people of the country who have mortgages are saying. They want a reduction and they want the Government to take action. They are very supportive of the Bill tabled by Deputy McGrath and what he highlighted three months ago. What they tell me and other Deputies is there has been no action to date and no substantial reduction by the banks, just an insult from week to week by the miserly reduction implemented. It is time for action to be taken by the Government and for the boot to be put in as regards the bankers who refuse to meet the demands of the ordinary people paying mortgages.

The Central Bank has lost all credibility. It continuously seems to tell the Minister and the Taoiseach we do not need legislation because the banks will comply, but the banks have not complied with the request or the way forward the Minister and Taoiseach state they want brought about. It is time the Bill before us was supported by the Government. It is totally wrong that the House would split on this and force it to a vote. Even at this late stage, it is important the Minister take off the chains surrounding him and decide to support Deputy McGrath's Bill.

Minister for Finance (Deputy Michael Noonan)

I thank Deputy McGrath for the Bill. I was sorry I could not be here yesterday but I was in Brussels. The Government is concerned about the issue of the high mortgage repayments being faced by mortgage holders and I have made it clear that the issue of a penal banking levy in the budget or powers for the Central Bank to regulate interest rates will be considered if sufficient progress on this issue is not made. I have also made it clear that I will meet banks again in September once I have reviewed the initiatives they have undertaken since the last meetings. At those meetings, I urged them to review their rates and products, and by the beginning of July to have simple options to reduce monthly mortgage rates for existing and new standard variable rate customers.

The main banks have announced a range of new products offering customers lower monthly mortgage repayments, so any suggestions there has not been action is not an accurate presentation of the facts. The question is whether individual banks have done enough for their customers and whether there are new products the type their customers want. A review of what progress has been made is taking place. The main lenders have initiated new measures ranging from lower standard variable rates to new loan to value products and fixed rate products. These new offerings could result in monthly savings for mortgage customers and I urge customers to see if an option is available which will suit their circumstances and save them money on their repayments.

Customers with high standard variable rates now have options to lower their monthly mortgage repayments, which is what I urged the banks to provide. Many of the new fixed rate offerings are considerably lower than the standard variable rates and could result in immediate savings for borrowers where it suited their circumstances to change rate. I encourage Deputies to advise their constituents to examine the new offerings from their bank or other banks if they are in a position to switch because monthly savings can be made. While each customer should examine the range of new products and decide what is in his or her best interests, Deputies should also be conscious that advising their constituents not even to consider lower cost products or advising them to delay the decision to move to a lower product could mean they are advising customers to continue to pay higher monthly mortgage payments.

A number of the banks have embarked on significant advertising campaigns to attract new customers and encourage switching. This is important because if the banks believe they will lose customers, it will encourage them to offer more competitive rates to existing customers. Switching would also increase the overall competitive nature of the market, which in turn will drive down interest rates. We have not had much of a switcher market, but with increased promotion by the banks themselves and a significant public awareness campaign on this issue coming from the Competition and Consumer Protection Commission in early autumn it will be easier for customers to know how to go about this process and the savings which switching could mean for them.

Nevertheless, I remind Deputies the banks' announcements are being reviewed and a follow-up set of meetings is scheduled for September. Therefore, we are only in the middle of a process which I outlined in May, and to legislate now would not be appropriate. It is also worth noting that regulation of interest rates is complex and should not be undertaken lightly for a possible short-term gain if the long-term effects could prove more detrimental to customers. In this regard, I highlight again that on numerous occasions the Central Bank has said it is opposed to regulation of interest rates. As recently as this week, when I referred Deputy McGrath's Bill to the Central Bank for its observations, it repeated this position. As I have stated before, if the Central Bank wants the power to regulate interest rates, it will be given this power.

The Government must and will act in the interests of the people, but those interests are best served if we take account of the advice of the Central Bank and other independent bodies in this area. We should not return to a position where the advice of the Central Bank is ignored. We should take the time to consider this advice. That said, we will act if, on consideration, we believe it is the right thing to do, but let us not act rashly and have borrowers and taxpayers suffer the consequences in the long term.

Deputies should be aware of what is going on in another room in the building where the banking inquiry is under way and whatever the result is a Central Bank that did not state its independent view made a contribution to the crisis, so I will not ignore the advice of the Central Bank and Deputies opposite should not either. The Government is therefore opposing the Bill. I will keep the situation under review and the Government will continue to build on the work it has done to foster competition in the market, which represents the best solution to this issue long term.

Let us acknowledge the progress made, allow borrowers to look into the new options available to them and let us have the time to review carefully what has happened before acting. I am meeting representatives of the banks again in September and the Deputies may be assured that I will consider all options available to me at that time. I again thank Deputy Michael McGrath, as I know he is genuinely seeking a better solution. I appreciate the work he has put into the legislation.

Deputy Dara Calleary

I thank Deputy Michael McGrath for putting this Bill before the House. This week marks the fourth anniversary of one of Deputy McGrath's first Bills in this Dáil, the Family Home Protection (Miscellaneous Provisions) Bill, and tonight's Bill, relating to the Central Bank, continues the theme of protecting families doing their best to keep their homes. The warnings, with various signals from Deputy McGrath and Senators MacSharry, Byrne and others from this party, have been consistently ignored over the past few years. Today, there has been discussion on the growing housing problem in this city and across the country, with Dublin City Council left €18 million short for emergency housing provisions. That issue would not be so immediate and serious if the warnings issued by this party around housing had been heeded.

The Minister referred to what is happening in another part of these Houses. In the past number of days, concerns have been expressed about the position of the European Commission and the troika in particular. I have been consistent in the past number of years in querying the role of the Commission, in particular, in standing up for European citizens. It has not done enough and it has stood back in the face of the financial power of the European Central Bank, ECB, and the International Monetary Fund, IMF. It has failed the citizens of Europe and today we have seen a further example of that, as the Commission is failing the 300,000 Irish families on variable rate mortgages first and the citizens of the European Union second. It is doing this by advocating a position that giving them relief through the capacity to spend money in the economy and grow jobs by recognising they are paying over the odds but tying the hands of Irish authorities in doing anything about it. That is a complete dereliction of the Commission's responsibilities to citizens. If we are to have a European Union, it should be a union of people and not institutions. There should be no hierarchy within the Union with regard to the role of the ECB and IMF. It is extraordinary that the Commission would put the interests of bank profitability and future privatisation prospects - these are direct quotes from the today's report from Mr. Niall O'Connor - ahead of the interests of people who are paying over the odds.

The Commission has even acknowledged that the variable rates in this country are relatively high but it argues that slashing rates could discourage new banks from entering the market. That is a difficulty but the Minister's proposals do nothing for it. There are many banks leaving the market, both with respect to home and business loans, but the Minister has not offered any solutions in that respect. People do not have the capacity to switch as houses are in negative equity. The Minister has asked people to switch to the fixed rates, which might be fine for some who see those as suitable products. However, if the variable rate comes under the fixed rate, they will be tied into overpayments. I know some of the banks are offering products in this respect but there are also extra costs being imposed on families who do not have the €1,000 or €1,500 in conveyancing fees necessary to try to pursue the avenue proposed by the Minister. That is a problem, as the extra expenses for switching cannot be met because these families have been trying to pay over the odds to keep a roof over their head for five to six years. These people have looked on as those who bought into the market at a later stage could use products with cheaper rates offered by banks paid for by the profits garnered from those with the higher variable rate mortgages. They have looked on as their house values fell through no fault of their own and while their banks declined to deal with them with alternative mortgage provisions. While everybody celebrates on the recovery of our financial sector, these 300,000 people have been left flailing in the wind without any support.

It was striking to listen to this evening's debate, with all the Deputies who are normally behind the Minister cheering him on. I do not know where they are tonight. They all complained about the banks and said that we needed to do something about them. They were presented with a responsible solution and option but will still come in here in five minutes and vote against the Bill because they are looking to the Minister to do something in October, which is three months away. There may not be anything done at that stage, or if there is action, it will come on the cusp of an election; it will be another one of those back of the truck election promises to speak to the 300,000 people. If the Minister wants to act, he should do it now. He could have done it in May but the banks gave him lip-service. In fairness to the Minister, he took it on but the issue had to be brought to his attention and he and the Government had to be dragged once again, kicking and screaming, to the table by Deputy Michael McGrath and others. Despite the fact that the problem is serious, the Government stuck its head in the sand until it could do it no more. Do not delay any more or add to the misery these 300,000 people are enduring. The Minister should take action now and not wait until September, after the holidays, to package this in a pre-election budget.

I suspect the Minister is serious about this, along with many of his colleagues who have spoken in this debate. They are getting the same people in their offices as we are and they see the pressure that these people are under. Such people are getting no assistance; they will not get a back-to-school allowance or any of the supports that are available. They are trying but struggling, especially at this time of year. We need to try to give these people a signal that we are taking the issue seriously. We need to tell them that the Government, comprising democratically elected people who are responsible to their communities and their neighbours for the mandate they have to serve, is running the country. The Government must be seen as listening every day to the 300,000 people, understanding the pressure they are under. The people must not think that an unelected Central Bank is running the country.

I appreciate the Minister's comments about taking advice from the Central Bank and the lessons we need to learn. The Central Bank has a responsibility to the people, the citizens of the country, and it must understand that the banking system is not fit for purpose and puts the interests of the citizens of the country behind the interests of profitability, market share, the ECB and others. We need some sort of understanding within the Central Bank that it appreciates the magnitude of the problem but, to date, we have not seen that. The representatives of banks have had meetings and only one - AIB - has taken direct action in lowering variable rates. The rest of them have formulated products or snake oil tricks to try to convince the Minister and others that they are doing something about this issue. If a customer cannot or does not change products, it is the customer's fault and not the bank's fault.

The Minister has a crazy few days ahead of him in trying to help resolve the issues around Greece but in that resolution, people's lives must be put to the fore. There must be some sort of understanding within the troika, the European Commission and all the other elements that people's lives are being affected. It matters to the Greek people that their lives are put to the fore, instead of the interests of banks and bondholders, but it matters here too. There are 300,000 people who have done nothing but fight to keep a roof over their head and their mortgages up to date. They have tried to keep their house steady and their relationship with the bank correct in the face of all other pressures. They should be given recognition for their efforts and told that we appreciate that through their actions, they have contributed to a banking and economic recovery. They do not want what they have seen this evening in the form of a pat on the back and words of concern. Words mean nothing as they will not pay the mortgage at the end of the month.

Actions by Government Deputies this evening will say it all. If they vote against the Bill, they will choose once again to kick this can to October and probably beyond that. I sense from the Minister's speech that he is pulling back and no major action will be taken.

My colleagues across the House have a chance tonight to tell the banking system, once and for all, that this democratically elected Dáil Éireann is in charge and not some sort of unelected group, be it in Frankfurt or Dame Street.

Deputy Michael McGrath

I am delighted to wrap up the debate on this legislation. I thank all the Deputies from all sides of the House for contributing to what has been a very good debate. This Bill is intended to help mortgage holders. It is an honest effort on the part of Fianna Fáil to come up with a solution to the issue of excessive standard variable mortgage rates being charged to about 300,000 customers in Ireland. Those who derided Fianna Fáil's efforts in this regard over the last two nights should bear in mind that the essential tool this Bill sets out to provide to the Central Bank is one of two options the Minister himself is considering if he is not satisfied with the response of the banks to the efforts to reduce rates.

Over the last few months, we as a party have placed sustained pressure on the Minister, on the banks and on the Central Bank to deliver progress on this issue. There has been some progress, but it has been minimalist and insufficient. The response by the banks has been selective. Many customers who are in negative equity or have very little equity in their homes will not benefit at all from the changes that have been announced. It is worth recapping the variable rates that exist, even taking account of the new loan-to-value, LTV, products that some of the banks have announced. Variable rates for borrowers with an LTV ratio of between 80% and 90% are 3.9% with AIB, 3.95% with EBS, 4.3% with KBC if one moves one's current account there, 4.3% with Ulster Bank, 4.2% with Permanent TSB, 4.35% with ICS, 4.5% with Bank of Ireland, 4.95% with Danske Bank, and 4.4% with Rabobank. That is the actual picture for people who remain on a variable rate, even taking account of the LTV changes, and who have equity of less than 20% in their properties. Those who most need the help are getting the least help, and that is fundamentally unfair.

The other major option the banks are setting out is to move to a fixed rate. Moving to a fixed rate is a gamble. It might work out, but equally it might cost a person money. I am not going to advise people either way, unlike the Minister, who sent a clear signal last night on the news that people should enter into fixed rate arrangements. I will send no such signal because I do not know in what direction variable rates are going to go. We all want to see more competition brought into the Irish market, but there seems to be an assumption that some knight in shining armour is going to come over the horizon and offer rates of 2% to 3% in Ireland. There is no sign of that, because the Irish market is very small. About 52% of residential mortgages are trackers, which makes the market less attractive. We have mortgages with a value of about €20 billion that are in arrears, which also makes the market unattractive for a new entrant. I hope I am wrong, but I see no sign of a new entrant to the market. The only evidence so far of a new entrant has been vulture funds buying up mortgages from the former Nationwide, Bank of Scotland and others.

The reality is that, in the absence of legislation, any bank in Ireland today or any vulture fund owning a mortgage can hike the interest rate to whatever it wants, to 7% or 8%, and the Central Bank does not have a tool to deal with that. That is a deficiency which exposes mortgage holders to a very real risk. The issue here is that the cost of funds for the banks has fallen dramatically, to as low as 1% or 1.5%, as the Minister knows well. Introducing a bank levy in the autumn is not the way to go. It will simply result in higher charges or higher interest rates for some bank customers, and the Minister should not be doing that. Customers who are considering entering into fixed rate mortgages should now take advice, because the banks are clearly trying to induce them. They should tread very carefully and they should get independent advice. Many standard variable rate customers are trapped, especially those who borrowed in recent years, who are in negative equity or who have a very high loan-to-value ratio, as I have outlined. That is an issue the Minister needs to take up with the banks.

It would be remiss of us not to point out the obvious link that exists between high standard variable mortgage rates in Ireland and the level of mortgage arrears. The Central Bank has previously highlighted that link in a report because there is a very obvious connection. Many speakers have spoken about switching one's mortgage, as though it is similar to switching one's electricity supplier from Airtricity to Energia. It is not that simple. It is complicated, it takes time and it costs money. People should of course examine the possibilities and see whether they can gain from a switch, but for many people it is not the solution. The bottom line is that variable rate customers in Ireland are being treated unfairly. There is no justification whatsoever for the rates that are being charged in Ireland.

When the Minister is considering the response that the banks have provided, he should make the point that variable rate mortgages are a product in themselves and that product should be priced appropriately. Trying to direct people to fixed rate products is not the solution because ultimately it is a gamble that may or may not work out. He should bear that in mind. Ultimately, this is an issue of brass tacks. It is a bread and butter issue. It is about money in one's pocket. With each passing month that the Minister delays taking serious action on this, families are having to come up with additional money to pay the interest on their mortgage. They deserve the action of the House. That is why we commend this Bill to the House and it should be supported by all sides.

Question put:

The Dáil divided: Tá, 45; Níl, 70.

Tá

• Adams, Gerry.
• Aylward, Bobby.
• Boyd Barrett, Richard.
• Browne, John.
• Calleary, Dara.
• Collins, Joan.
• Colreavy, Michael.
• Coppinger, Ruth.
• Cowen, Barry.
• Daly, Clare.
• Doherty, Pearse.
• Dooley, Timmy.
• Ellis, Dessie.
• Fitzmaurice, Michael.
• Fleming, Sean.
• Fleming, Tom.
• Grealish, Noel.
• Halligan, John.
• Healy, Seamus.
• Keaveney, Colm.
• Kelleher, Billy.
• Mac Lochlainn, Pádraig.
• McGrath, Finian.
• McGrath, Mattie.
• McGrath, Michael.
• McGuinness, John.
• McLellan, Sandra.
• Martin, Micheál.
• Murphy, Catherine.
• Murphy, Paul.
• Ó Caoláin, Caoimhghín.
• Ó Cuív, Éamon.
• Ó Fearghaíl, Seán.
• Ó Snodaigh, Aengus.
• O'Brien, Jonathan.
• O'Dea, Willie.
• O'Sullivan, Maureen.
• Pringle, Thomas.
• Ross, Shane.
• Shortall, Róisín.
• Smith, Brendan.
• Stanley, Brian.
• Tóibín, Peadar.
• Troy, Robert.
• Wallace, Mick.

Níl

• Bannon, James.
• Breen, Pat.
• Butler, Ray.
• Buttimer, Jerry.
• Byrne, Catherine.
• Cannon, Ciarán.
• Carey, Joe.
• Coffey, Paudie.
• Conaghan, Michael.
• Conlan, Seán.
• Connaughton, Paul J.
• Conway, Ciara.
• Coonan, Noel.
• Corcoran Kennedy, Marcella.
• Costello, Joe.
• Daly, Jim.
• Deasy, John.
• Deenihan, Jimmy.
• Deering, Pat.
• Dowds, Robert.
• Doyle, Andrew.
• Durkan, Bernard J.
• English, Damien.
• Farrell, Alan.
• Fitzpatrick, Peter.
• Hannigan, Dominic.
• Harrington, Noel.
• Harris, Simon.
• Hayes, Tom.
• Heydon, Martin.
• Humphreys, Heather.
• Humphreys, Kevin.
• Kehoe, Paul.
• Kenny, Seán.
• Kyne, Seán.
• Lawlor, Anthony.
• Lynch, Ciarán.
• Lyons, John.
• McEntee, Helen.
• McFadden, Gabrielle.
• McGinley, Dinny.
• McHugh, Joe.
• McLoughlin, Tony.
• Mitchell, Olivia.
• Mitchell O'Connor, Mary.
• Mulherin, Michelle.
• Murphy, Eoghan.
• Nash, Gerald.
• Nolan, Derek.
• Ó Ríordáin, Aodhán.
• O'Donnell, Kieran.
• O'Donovan, Patrick.
• O'Dowd, Fergus.
• O'Mahony, John.
• O'Reilly, Joe.
• O'Sullivan, Jan.
• Perry, John.
• Phelan, Ann.
• Phelan, John Paul.
• Rabbitte, Pat.
• Ring, Michael.
• Sherlock, Sean.
• Spring, Arthur.
• Stagg, Emmet.
• Stanton, David.
• Tuffy, Joanna.
• Varadkar, Leo.
• Wall, Jack.
• Walsh, Brian.
• White, Alex.

Tellers: Tá, Deputies Michael McGrath and Dara Calleary; Níl, Deputies Paul Kehoe and Emmet Stagg.

Question declared lost.