Central Bank (Variable Rate Mortgages) Bill 2016: Second Stage (Resumed) [Private Members]

Question again proposed: "That the Bill be now read a Second Time."
Debate resumed on amendment No. 1:
To delete all words after "That" and substitute the following:
"the Bill be read a second time this day six months to allow for scrutiny by an appropriate Select Committee to examine and address the following issues:
a) There are major constitutional issues which fall to be considered in relation to interference in vested property rights, the retrospective application of the proposals and the absence of an appeal mechanism.
b) Under the EU Treaties there is an obligation to seek an advisory opinion from the European Central Bank where domestic legislation is proposed which affects the workings of the Central Bank. This has not taken place. A failure to consult the European Central Bank is an infringement of Decision 98/415/EC and could lead to infringement proceedings against Ireland.
c) The Central Bank has not sought the proposed powers to regulate variable rate mortgages. The Central Bank is independent and the Bill provides only that it "may" issue directions in respect of interest rates. The Central Bank cannot be required to exercise the proposed powers. The Bill requires the Central Bank to assess whether market failure exists in the Principal Dwelling House mortgage market but assessment of competition issues comes within the remit of the Competition and Consumer Protection Commission.
d) Competition and the provision of choice for consumers is the best way to achieve a sustainable long term solution to the issue of high mortgage repayments and the proposed Bill is likely to restrict or limit competition in the mortgage market. Following meetings with the banks last year and ongoing pressure, the banks have made a number of reductions to their mortgage offers and some welcome competition is coming into the market.
e) Regulation of interest rates in the manner proposed in the Bill could have unintended consequences on the availability and cost of credit which would lead to consumer detriment in the longer term.
- (Minister for Finance).

I welcome the Bill tabled by Fianna Fáil in so far as it attempts to address the issue of profiteering by the banks at the expense of mortgage holders with variable interest rates. This is a positive move. It is equally positive to try to introduce measures whereby the State, the Government and the Central Bank would intervene where the market has failed or is failing. The market is failing and there is profiteering going on so I welcome this.

Much of the media commentary about the Bill has missed the important point, which relates to the issue of the new politics. Much of the media narrative is that what is significant is that the Government may be defeated this evening. This is very interesting media stuff, but it has nothing to do with the Bill. Whether the Government wins, loses or presses amendments - and I will discuss the amendment shortly - is not actually the issue. The issue is what is in the Bill. I appeal to the media to embrace a little of the new politics and recognise that we are starting to move towards discussions of substantial policy as against the back and forward and the Punch and Judy show of political parties. In that context, this is a positively motivated Bill which tries to do something to address the profiteering and market failure in the area of mortgage interest rates.

I do not accept the Government's amendment that we should examine the Bill but send it back to the pre-legislative stage. If the Government thinks a little more time is required to consider the provisions of the Bill, it should allow it to proceed to Committee Stage and leave a sufficient gap after Second Stage to allow for further consideration. It is the old politics to try to bat it backwards. The Government should pull back from this. This needs to be given serious consideration and we need an in-depth debate on Committee Stage.

Having said that, we would like to see the Bill pass Second Stage. There is a similarity between the method running through the Bill from Fianna Fáil and the Government's opposition to it. The Government is essentially stating that the problem with the Bill is that it would interfere with the market, that we need the market to determine interest rates and that competition is the way forward. Interestingly, this is what the Bill says to a large extent. On substantial policy grounds, while I agree with a number of things Deputy Michael McGrath is trying to do, in terms of empowering the Central Bank to intervene with banks which are profiteering and charging excessive interest rates in respect of the cost of their own borrowing on the international markets, I totally disagree with the Bill in so far as, in essence, it is trying to establish a perfect market and speaks about the Central Bank trying to enforce a perfect market, with the assumption that competition between the banks will address this issue. It will not. There is a serious danger; if we think back to the pre-crisis period it was precisely competition between the privately owned banks for profit that caused the bubble and crash that followed. While I am in favour of the Central Bank having the power to intervene, I do not believe this is the basis on which it should intervene to create a perfect market.

What we need is public banking. We need a banking system that runs on a national level in the same way the credit unions operate. They are not run for profit and their purpose is to lend money to people for things they need and not to extort from them through the charging of interest. We should have social objectives for the banking system as a whole and the Central Bank should allow this. In fact, the Central Bank is blocking the further expansion and development of credit unions and I can only conclude this is because it wants to protect private banks. The Bill should pass Second Stage and the Government should not block it, but it needs a hell of a lot more discussion and I do not agree with everything in it.

I support the principle of this legislation. There is a particular financial limit in it, so we are considering modest family homes in the main. Over the last five years, one of the big frustrations has been the very much hands-off approach when it comes to the individual mortgagee. There has been a real feeling of unfairness that the decisions made have been made in favour of the banks at the expense of some of their customers. There is a different rate for people who are lucky enough to be on tracker mortgages. However, there is a real feeling of unfairness about the variable interest rate, which very often threatens the affordability of accommodation and pushes families needlessly into mortgage debt.

From that point of view, we very much welcome that this Bill opens up a dialogue. One of the things that causes me concern is that we talk about the ECB and how the ECB will not permit something. It is quite extraordinary how the ECB can facilitate, and has facilitated, measures that have imposed a major burden on this State while it stands over or wields a big stick over individual mortgage holders, who are struggling, even though its lending rates are very low. That is unacceptable.

There is a very human cost to people being constantly in debt and constantly struggling and we are even starting to see very often health implications for people who are under stress all of the time. This Bill in part attempts to remedy this human dimension. I see absolutely no reason a Bill such as this one cannot pass Second Stage and go to Committee Stage in order that it can be fleshed out and certain provisions can be changed, if they need to be changed.

It also concerns me that we constantly trot out the Constitution when it comes to the little people. If one reads the article in the Constitution on property rights, one sees there is no such thing as absolute rights. Property rights are very well defined in Article 43. It uses the words "common good" and "social justice", so the property rights are essentially tempered by other rights. Very often, however, when it comes to the little people, property rights are taken as absolute rights and there is an onus on us on some occasions to challenge this. Lawyers disagree all of the time but if one does not question them or push them to the point where that is a consideration, one is taking it as a given that certain rights are absolute and I for one do not accept that premise.

For these reasons, we are happy to support this Bill. It needs to go to Committee Stage. There are provisions in it that need further consideration but I see no reason it cannot proceed to Committee Stage and get the kind of scrutiny at that level that the parliamentary structure allows for.

The starting point here is the accepted fact that the holders of standard variable rate mortgages are being exploited and ripped off and are paying approximately 2% over the European average rate for their mortgages. That represents an extra €330 per month for a person on a €200,000 mortgage. That is a huge burden and hardship for low and middle income households and is having a significant deflationary effect on the economy. For this reason, the Anti-Austerity Alliance will vote in favour of the Bill because we support any attempt to curb the profiteering of the banks and to relieve the massive burden on the shoulders of low and middle income workers.

The response of the Government, in particular the Minister, Deputy Noonan, must be noted. Are we getting a glimpse of new politics here? The numbers are such that the Opposition can get Bills passed but will that be subjected to a mini operation fear every time we are about to do so? The clear implication of a relationship of causation between the publication of the Bill and the drop of 10% in bank shares is, to quote Deputy Michael McGrath, clearly ridiculous. It was a ridiculous contribution on the part of Deputy Noonan and it is not the way politics should work. There is no basis in fact to link the events in that way.

I repeat the point which Deputy Boyd Barrett made that the fundamental problem economically and ideologically with the Fianna Fáil approach, as represented in its Bill, is that it does not represent a change from the political approach that has led us to where we are, to the banking crisis, and which has informed the approach of this Government and previous Governments. This is summed up in the approach of the Bill when it states that the problem is market failure and that we only need to sort out the market and get a perfectly functioning market. The market is the failure. That is the problem. The problem is that we have a privately owned banking system operating to maximise profit and a so-called independent central bank, in this case a European Central Bank, which is completely unaccountable to any democratic body and which functions in the interest of the market, that is, in the interests of the profiteering of the banks. Unless we deal fundamentally with that problem, we will not deal with the fundamental problems of people dealing with the banks and getting ripped off, for example, on variable mortgages. The banks are increasing their profit margins on variable mortgages to cover the losses on other loan books, such as tracker loans and buy-to-lets. That is what profit-maximising companies will do.

The Government has consistently stated it does not intervene in the day-to-day decisions of the banks and that it is a matter for the management of the banks in question. That is a pathetic attempt to wash its hands of any responsibility for this rip-off. The Government and all those who support this private capitalist market system are responsible. They have set up the banks with the mandate to maximise profit which is exactly what they are doing. That is the problem with Fianna Fáil's Bill: it accepts the logic that the banks must be run for profit, as opposed to the idea of a public banking system set up as a public utility under democratic control.

If the Government were serious, it would introduce legislation and amend regulations to instruct the banks not to act solely to maximise profits at the cost of ordinary mortgage holders. It would act to have the banking system run democratically as a public utility in the interests of the majority and act to implement write-downs and rate reductions for ordinary mortgage holders. It would also instruct the banks to cease implementing evictions and court proceedings against mortgage holders in financial difficulty. Instead of moving in that direction, the Government is intent on the full privatisation of our banks, which will be yet another historic robbery. The rip-off on variable rates is one example of how the Government is deliberately fattening up the banks for privatisation. Another is changes to the tax rules, which mean that AIB will get a tax write-off of €3.24 billion, Bank of Ireland of more than €1.5 billion and PTSB of approximately €500 million in terms of their being able to write off losses that were the State's and the public's losses and then getting the benefit of that on their balance sheets.

To really tackle the mortgage rip-off, we need a completely different model of banking. We also need an end to the provision of housing on the basis of the market. The AAA will vote in favour of this Bill. However, we need to see more substantial change. We need measures such as the write-down of mortgage debt to reflect the true value of the home, rent controls and a massive plan of public investment which would see the construction of social and affordable homes. It is only through breaking with the capitalist market that we can provide for the housing needs of all and prevent these sorts of rip-offs.

In the spirit of this new dispensation and new politics, the Labour Party intends to support the passage of this Bill to Committee Stage.

What a pity it did not do so when it was in government.

We believe the Oireachtas, through its committees, has the requisite capacity to interrogate the three flaws, as articulated by the Minister, Deputy Noonan, namely the constitutionality of the Bill, the need to consult the ECB before the intended Bill could be enacted and the statements by the Governor of the Central Bank that it does not wish to regulate interest rates. If it is the will of the House that this Bill be considered under pre-legislative scrutiny, then so be it. However, we see no reason that is necessary. Notwithstanding the consumer protection regulation Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, which ensures access to the Office of the Financial Services Ombudsman and ensures the protection of the code of conduct on mortgage arrears, there is still a number of borrowers who signed up for variable interest rates at the top of the market who feel a legitimate grievance and feel left behind. Section 5 of the Bill, which deals with the issuance of a direction by the Central Bank to a specific lender or lenders, deserves further scrutiny. The issue of contract law looms large over the section but we believe that this is something that can be examined further at the next Stage of the Bill.

We recognise that banks have to make a profit but there is a fine line between making a profit and profiteering. A person in my constituency of Cork East took out a mortgage in 2009 with Permanent TSB. Since 2009, that person has been paid interest, in one specific period, at rates of up to 6.5%. The borrower estimates that over the lifetime of the mortgage he could end up paying an additional €100,000 in interest payments alone and what grieves that person is the fact that mortgage products that are offered now on a similar property of similar value are significantly cheaper. He recognises that he signed a contract, and he recognises that banks must make a profit but with some justification he feels that having to pay up to €100,000 more than his neighbour for the same amount of money borrowed, albeit from a different bank, is unfair.

On Committee Stage my party intends to examine more closely the issue of marginal interest. The question of profitability versus profiteering could be addressed, for instance, through the capping of variable interest rates such that, for instance, if the ECB sets a rate at 2.5%, a margin could be determined, for instance, two percentage points in excess of that, which would allow for a degree of profitability and competition without profiteering in that banks could compete within the two percentage points margin. We want to explore that at a further Stage or at least have a proper discussion in a collegiate way around that. I accept it is interventionist within the market but my party considers it is worthy of further examination.

We have some questions on section 2, on the assessments. It is difficult to understand how the Central Bank, subject to the 11 "factors" outlined in the assessment in the Bill, could reasonably conclude that a market failure exists. Section 4(2) states that ""market failure" shall mean a situation in which market conditions are such that a lender is, or lenders are, charging a variable interest rate or variable interest rates for principal dwelling house mortgage loans which are higher than the Central Bank considers can be reasonably and objectively justified by reference to the factors set out in section 3." The question is, how can the Central Bank, even when the 11 factors are taken into account in section 3, reasonably intervene to make a direction in an individual or collective case if those individuals have, in the first instance, signed a contract with a mortgage provider, and the question then arises, does the law of contract supersede the enactment of this Bill or does this Bill give powers to the Central Bank that may be subservient to the law of contract. My party has an open mind in terms of exploring those questions at the next Stage and while we may differ from Deputy Paul Murphy in regard to the recognition that banks must make a profit, we have to distinguish between making a profit and profiteering.

In the spirit of the new paradigm, in this current enlightenment period, which I hope will last, we will explore the Bill further. We believe that there is not necessarily a need for pre-legislative scrutiny because we all have the wherewithal within this House to be able to interrogate the Bill further and if we need to bring in experts to address any of the issues or the questions that may be outstanding then in the spirit of the new dispensation in which we find ourselves we should take a pragmatic view on this Bill and allow it to proceed to the next Stage and discuss these matters further.

I call Deputies Lawless, Troy, O'Rourke, Darragh O'Brien, Scanlon and Thomas Byrne. They are sharing 30 minutes and have five minutes each.

I welcome the opportunity to speak in favour of this Fianna Fáil Private Members' Bill.

All present in the Chamber today are aware that a mortgage is the biggest single outgoing facing any family. There are at least 300,000 households in this jurisdiction operating under standard variable rate mortgages, including my own. Tens of thousands of variable rate mortgage customers are currently paying exorbitant rates, which we all know and hear about daily in our constituencies, on the airwaves and in our clinics. We know them to be substantially in excess of the banks' costs for the same funds.

We, in this country, have benefitted least from the current low-interest regime which prevails in Europe. For a typical €200,000 mortgage, a standard variable rate customer will pay approximately €6,000 a year more in interest than a borrower on a tracker mortgage. Any hard-off family around the country would be far better with this extra money at its disposal. It would mean more money to spend in the local economy to pay their bills, their car loans, their school costs, their educational costs and their household bills, and more money in general placed back into the local economy and environment, which would be a far better placed home for it than super-normal profits in the banks. The plights of these families should be as important to us all as the determination rightly to make our banks more profitable again but we have to get our priorities, and the balance, right. We all understand the need for the banks to recover, particularly now most of them are in public ownership, but it cannot be at the expense of hardworking homeowners squeezed on punitive and unjustifiable interest rates. The banks must begin to bear social responsibility.

I welcome the recent announcement of a reduction by AIB, to 3.4%, in its standard variable lending rate. However, other banks have been less forthcoming. For instance, Bank of Ireland made no reductions at all in its standard variable rate and yet announced last year a rise of 30% in pre-tax profits, with profits in 2015 of €1.2 billion. This is an astronomical profit for a bank that has passed no return or leeway on to the hard-pressed consumers, taxpayers and constituents. The Permanent TSB highest rate for consumers in negative equity or whose mortgage is equal to 91% or more of the value of their home, is 4.3% - a reduction, it is acknowledged, although a bare one, of 20 basis points.

It is my firm belief that the rates being charged are not justified based upon the banks' cost of borrowing. The extent of this problem can be seen from the fact that the standard variable rate for residential mortgages by the State-owned Permanent TSB and AIB, as well as other banks in this jurisdiction, is two percentage points higher than the equivalent mortgage rates in other eurozone countries. Banks operating both in the Republic of Ireland and in Northern Ireland also apply the two percentage points differential. If one lives in Newry or in Belfast, there is a differential of two percentage points in one's rates depending on which side of the Border one lives on - for the same bank, for the same funds, for the same cost of borrowing and from the same European Central Bank underpinning the whole amount.

I also query, in such a market with a two percentage points differential between the rest of the eurozone and the Republic of Ireland, why we have not seen more licence applications, more entrants to the market and more competition emerging.

I ask the Central Bank to consider these questions, why these licences are not coming through, why these applications are not being made and what it is about our competitive landscape that makes us averse to it.

I utterly refute the banks' claim that losses on tracker mortgages are an excuse to rip off SVR customers. It is no more justifiable for SVR customers to make good these losses than it is for development or commercial loans or any other part of the loan book. While it is acknowledged that tracker mortgages pose a challenge to the banks, it must be tackled as part of the overall review of banking debt. Our legislation would deal with this in a fair and equitable manner. It would provide a fair balance between the need for State-owned banks to make a profit and the rights of families who are paying mortgages. It is prudent and efficient for the Central Bank to be given responsibility for monitoring the level of competition and ensuring fair rates are charged. There must be a fair balance between the banks and the hard-pressed customers.

I welcome the opportunity to contribute to this important debate on an issue on which my colleague, Deputy Michael McGrath, has led the charge for the past two years. Sinn Féin has come on board most recently. The Irish Independent has given the matter prominence during recent months and it is a significant issue, as the Minister acknowledged on "Morning Ireland" this morning. Hundreds of thousands of families across Ireland are being ripped off every day of the week.

I am surprised at the attitude the new Government is taking to the proposals before the House. Last night the Minister for Finance, Deputy Michael Noonan, displayed arrogance when he said a very meaningful suggestion, in legislation that would tackle the issue facing hundreds of thousands of families, had been the cause of a 10% drop in bank share prices. It was ludicrous. The Government is stating our Bill is unconstitutional. It is coincidental that it is now unconstitutional, given that the Government did not cite unconstitutionality as a reason in voting it down in April 2015. At the time it did not have to mention the unconstitutionality of the Bill because it had such a large, sweeping majority that it was able to ram through any proposed legislation brought before the House. However, I am not surprised, given that during the past five years Fine Gael has been the champion of the banks to the detriment of ordinary working people, but I am surprised that the new coalition partners are not trying to make it see sense. I would have thought the Independent Deputies who support the Government would tell it to wake up and realise it was decimated in the most recent general election. Fine Gael and the Labour Party together lost more than 50 seats because they had failed ordinary, decent, hard-working people. If Fine Gael proceeds to push its amendment this evening, it will, once again, demonstrate that it is not interested in supporting ordinary, decent, hard-working people. It has allowed vulture funds to sweep in, take properties from people and sell them for much less than their loan values.

The mortgage to rent scheme was introduced to support families who ran the risk of losing their properties. In February I asked how many people had availed of the scheme. Of the 3,500 people who had applied for the scheme, 150 had been approved. This is despite the fact that the Government stated the scheme was under review and that it would make whatever modifications were necessary to support families at risk of losing their homes. It has not done it during the past five years and all indications suggest it is not prepared to take the necessary actions to support struggling families.

This debate is about variable interest rates. I will focus on the 300,000 variable interest rate customers whom the Government is letting down, despite its promise in the programme for Government to make every effort to take whatever action is necessary to support them. That is not happening. Every passing month it is crippling working families. I welcome the road to Damascus conversion of the Labour Party. Had it taken the same stance it is taking tonight in February or March 2015, it would have saved hundreds of thousands of customers thousands of euro.

In the spirit of our constructive proposals that would help families, I ask the Government to withdraw its amendment. The Independent Alliance focus in the Government should ensure it will withdraw its amendment and let the Bill proceed to Committee Stage. Although we are not saying it would answer all issues, it warrants further discussion. We did not pull this out of the hat in 24 hours but have worked on it for more than 24 months. It makes sense. I appeal to the Government to withdraw its amendment and let the Bill move to the next Stage.

I commend Deputy Michael McGrath for tabling the motion and thank him for the considerable amount of work he has carried out on behalf of beleaguered variable rate mortgage holders. Fianna Fáil has been trying since July 2015 to take the banks to task on the subject of rip-off variable rate mortgages and I welcome the opportunity to contribute to this long-overdue debate.

More than 300,000 households hold SVR mortgages and, collectively, owe €40 billion. While the recent reduction by some banks of their rates is to be welcomed, the interest rate on some variable rate mortgages still stands at approximately 4.5%. This means that a customer on an existing variable rate mortgage over 20 years is paying approximately €1,500 per year more than in the offer available to new customers and €6,000 more per year than a customer with a tracker mortgage for the same amount.

For all that the banks have been advertising in promoting the switching of mortgages, the reality is not so simple. With extensive legal fees and loopholes attached to such transfers, the banks are very vocal in their offer of cash back or assistance with legal fees in their bid to attract new customers. However, they are doing nothing to help existing mortgage holders to make a switch. There is a clear case for the Central Bank to introduce a statutory code of conduct on mortgage switching, similar to the code in place for switching a current account from one financial institution to another which has proved successful. A statutory mortgage code that would clearly set out the obligations of a financial institution and protect the rights of the mortgage holder is urgently required.

The banks' refusal to budge on variable rates to offer reduced fixed rates to existing customers is another inadequate response that is not sustainable for the large number of customers involved. Locking customers into what is only a marginally reduced rate for periods of between two and five years means that these customers have been excluded from potential rate reductions or availing of lower rates from new entrants to the market. Additionally, it has a significant impact on homeowners who are trying to sell, given that they would not have to incur penalties to break from fixed terms. It is unfair to expect customers, already squeezed by excessive variable rates, to accept that fixed-term rates are the solution.

In most instances, the monthly mortgage repayment is the most significant financial outgoing of a homeowner, whether a family, a couple or an individual. In most cases, homeowners have been left to look on in frustration and distress as they see their mortgage rates unchanged while rates have fallen generally. Mortgage arrears are at a distressingly high level and a devastating human toll has been taken on hard-pressed families and individuals. Excessive variable mortgage rates are linked with record levels of mortgage arrears. A 2012 Central Bank report concluded that high variable rates continued to exert upward pressures on arrears. Banks' engagement with those in mortgage arrears has been piecemeal at most and the solutions offered are inadequate.

Variable rate mortgage customers are now on interest rates that are three times those being paid by tracker mortgage borrowers. While we recognise that tracker mortgage borrowers represent a significant drain on the banks' loan books, it is not an acceptable reason to rip off standard variable rate customers.

The Bill before the House is designed to give the Central Bank new powers that would have the effect of reducing monthly repayments for many of the 300,000 standard variable rate customers and it will also give comfort to the 46,000 who have loans in the hands of non-bank lenders. This Bill is a necessary response to the complete failure by many lenders to pass on the lower interest rates set by the European Central Bank. While increased competition in the mortgage market, which seems to be the solution on offer by the Minister for Finance, is to be welcomed, it is again a wholly inadequate response.

I welcome the measures outlined in the Bill and many of the home owners I have been speaking to in my constituency of Kildare North are anxious to see tangible and viable solutions to the problem of exorbitant mortgage repayments. People have suffered enough at the hands of the banks. We have an opportunity to make a difference to thousands of hard-pressed mortgage holders. I urge, therefore, that the Bill be passed to Committee Stage with a view to all Stages being completed and the legislation being put in place as soon as possible.

This Bill presents an opportunity for Government Deputies and Ministers to redeem themselves. The track record of the previous Government with respect to mortgage holders has been nothing short of abysmal. One of the first things the Minister, Deputy Noonan, did in the previous Government was to rip up the previous code of conduct on mortgage arrears and water it down in favour of the banks. That happened and that is a matter of record. That Government then moved on to set aside the Dunne judgment, which gave some protection to people in family homes by stopping banks repossessing those family homes. That Government then brought in the Land and Conveyancing Law Reform Act 2013. We said to the Minister's former colleague, the former Minister for Justice and Equality, Alan Shatter, at the time that it would lead to thousands of civil bills and thousands of home repossessions, as it has done and is doing. In that watering down of people's rights, that Government became a cheerleader for, and a supporter of, the banks and it put their interests above those interests of the people it was supposed to represent.

When we look further down the track at the State-controlled mortgages, the IBRC mortgages, the Minister, Deputy Noonan, in the previous Fine Gael and Labour Party Government, permitted the sale of those mortgages - a mortgage book of 49,000 mortgages - to vulture funds. He would not publish the discount at which the mortgages in that mortgage book were sold for nor would he offer the same deal to the mortgage holders. Furthermore, even with the Minister's watered down code of conduct on mortgage arrears, those vulture funds are not covered under the statutory regulations, an aspect which is also part of the Bill my colleague, Deputy Michael McGrath, has produced.

The Government has a moral obligation to let this Bill pass Second Stage and go to Committee Stage. As previous colleagues said, when this legislation was introduced previously and when a motion was introduced in March 2015, issues regarding the illegality or unconstitutionality of such measures were not raised. The Minister, Deputy Noonan, introduced a red herring yesterday when he said that bank shares have dropped 10% because of the introduction of this legislation.

I would remind the Minister that we in a previous Government had to take very tough decisions to save the banks and the financial system but, coupled with that, we brought in very strong and robust protections for mortgage holders. The Minister, during the term of the previous Government, watered them down and left the people victims of the banks. The Minister for Children and Youth Affairs, Deputy Zappone, whom I congratulate on her appointment, during the previous Seanad in which I also served, supported the Family Home Protection Bill that we, as a party, put forward to afford home owners the protection they needed and deserved. This legislation would go some way to redeeming the previous Government's record on mortgages.

My colleagues have outlined the cost. Taking the example of the constituency in which I live, I bought a three-bedroom standard family terrace house in my constituency in 2006 for which I paid €580,000. That was not above and beyond the price for that type of house at the time. I was one of the fortunate ones who had a tracker mortgage. Many neighbours in my estate paid the same amount for their houses and they have their mortgages with Bank of Ireland and other lenders, which charge average variable rates of 4.5%, resulting in their repayments being hundreds of euro more than mine. That is not something any Government, Dáil or Parliament should stand over.

The Minister, Deputy Noonan, should ask himself whether he is a Minister for the people or for the banks. His track record during the past five years and during the short term this Government has been in office has proven again that he is a Minister for the banks. There is no reason the Government should have tabled an amendment to the motion for the Second Reading of this Bill. It should withdraw it, allow the Bill go to Committee Stage and refine and improve it, if needs be. People need to see action in this regard. The only action they have seen in the past four to five years has been that taken to reduce their rights as home owners.

AIB, in reducing its rates four times in the past 18 months, has seen a reduction in the number of mortgage arrears and an increase in its profits. Bank of Ireland stands over a 4.5% average variable rate, while AIB has a 3.4% rate, resulting in hundreds of euro in the difference in repayments. The banks are offering fixed rate mortgages of up to 6% and 7% for people to move out of variable rate contracts. It is ludicrous and ridiculous. The Minister needs to take a stick to the banks; it is all they understand. This legislation is a start in terms of fairness for the 300,000 plus people and families, many of whom purchased their houses between 2004 and 2007. I am not sure whether the Minister, Deputy Noonan, has a mortgage, although he probably does not have one after his tenure in this House. That may be the reason he does not understand the issues facing normal working families in this country. He has a chance now to accept this Bill and to allow it go through to Committee Stage. We can work on it together to improve the lot of mortgage holders who are paying hundreds of euro above the odds every single month.

I am delighted to have this opportunity to speak on this Bill. The Central Bank has consistently failed to do anything about exorbitant interest rates. The issue affects at least 300,000 mortgage holders on variable rates and these families have benefitted least from the current low interest rate environment in Europe. Collectively, as my colleague said, they owe €40 billion. A 1% cut in mortgage rates would give an average boost of more than €1,300 per annum to these families.

Since Fianna Fáil put standard variable rate mortgages on the agenda in March 2015, the banks have sought to swindle customers with minor changes to rates, most recently with a number of banks announcing a reduction in fixed rates, but reducing fixed rates is simply not good enough for the vast majority of customers. Banks are engaged in a policy of making certain offers available only to new customers. For example, Bank of Ireland will not allow an existing customer to fix his or her rate for a period of less than two years. This leaves customers in a position where they most likely will not benefit future rate reductions or lower rates. An existing Permanent TSB customer wishing to fix his or her mortgage for two years would pay 7.25% or 8.75% for a five-year fixed rate. By contrast, a new customer can fix his or her rate for between 3.7% and 4% for two years or 3.95% for five years. This legislation would require banks to treat new and existing customers equally. It is very important that should happen. Until recently, the Central Bank was producing figures on mortgage rates that understated the extent of the rip off.

With each passing month families are paying sky high interest rates. While the announcement earlier this month of a reduction by AIB to 3.4% for both new and existing customers is welcome, other banks were less forthcoming. The main focus of their response has been to change their fixed rate offering, which we know provides no comfort for most customers. AIB's latest rate reduction will benefit approximately 76,000 mortgage holders and would result in an annual saving of €320 for owner occupiers with a €200,000 mortgage over 25 years.

Variable rates here are twice what they are across the eurozone. The Central Bank has consistently put the interests the banks ahead of those of customers on the variable rate issue. High variable mortgage rates are evidence that the banks regard variable rate customers as easy prey to make up for losses suffered. We all know about the suffering of the people of this country when the Government of the day had to invest billions of euro in the banks.

Who was paying it? The answer is the hard-working, decent, honest-to-goodness people who had to pay, through their taxes, to support the banks. It is time for a little bit of help from the banks for the people who are desperately trying to hang on to their homes.

The 2012 Central Bank report concluded that a risk with higher variable rates is that they may be counterproductive and continue to exert upward pressure on arrears. There are 92,000 family home mortgages in arrears and 50,000 of them are more than a year behind in repayments, with accumulated arrears amounting to €2.3 billion. While the number of households in short-term arrears has fallen, the trend in long-term arrears has been steadily worsening. That is because of the restrictions of the banks and their enforcement of penalties on people who have difficulty paying. They are the ordinary decent people of this country who are struggling to hang onto their houses but who, despite their best efforts, are falling into arrears. As a result, extra charges and penalties are being imposed on them. The Bill will provide for sustainable solutions to these mortgage arrears for those facing repossession as a result of high variable interest rates.

The Minister argues that the Bill is unconstitutional, but this case was not made when it was previously voted down in the Dáil. The legislation Fianna Fáil proposes is balanced and in the best interests of the general public. The Central Bank would be given responsibility for monitoring the level of competition in the mortgage market and the fairness of the rates charged. For example, in respect of those mortgage holders whose loans are sold to vulture funds, there would be a system of sanctions for banks which fail to comply with a direction order from the Central Bank. The Minister for Finance met the banks last summer to address the need for a reduction in standard variable rates and the deadline has long since passed for overcharging lenders to reduce those rates. This is why a legislative framework is needed.

I am delighted to speak on the Bill and I commend my colleague, Deputy Michael McGrath, for his consistency and doggedness in bringing it forward. Not only is he reintroducing the legislation we brought forward last year - at which time it was voted down - he is also fulfilling the promise of the Minister who said that if the banks did not act, he would do so. As the Minister has failed to act, it is incumbent on us to do so and to stand up for those with mortgages. We stand up for home owners and say to the banks "Enough is enough".

With European interest rates at record lows, those on tracker mortgages have an historic and probably once-off opportunity during this period to deleverage and reduce their balances. Some people are in a position to afford to pay a little bit extra off the principal to prepare them for later on in the mortgage when interest rates may be higher. Those on variable interest rates which the banks can impose at will have no such opportunity and no such comfort that they may be doing something right for the future. What is happening in many cases is that they are being driven further into arrears because of high interest rates. That is wrong and it is damaging the economy. If interest rates can be reduced, by whatever means and whether through competition or the threat of action, it can only benefit the economy.

Many issues have been raised in respect of this matter. My colleagues have already dealt with the constitutional ones. The Minister for Children and Youth Affairs, Deputy Katherine Zappone, will remember from her time in the Seanad that every time the Government wanted legislation not to pass, constitutional reasons, usually of the vaguest type, were put forward. Yesterday, it was unprecedentedly the case that the Minister for Finance quoted the authority of an investment bank for a constitutional interpretation of legislation. It was extraordinary and unprecedented. Today, we have Davy Stockbrokers, which is well respected in its field, giving us all sorts of reasons the Bill should not be put forward. Davy is straight up and tells one its conflicts of interest. It acts as stockbroker to Bank of Ireland and Permanent TSB. There is no hiding it and the company is honest about it. However, we in Dáil Éireann have a duty to the general public and to society as a whole. While we certainly have a duty to the banks and the economy, we have a duty first and foremost to the people of Ireland. People with variable rate mortgages are being punished for what was, in many instances, the toss of a coin. The vast majority of people with mortgages may have started out on short-term fixed rate mortgages for a year or two and many, including me, would not have looked at the implications beyond two years. Some would have been given a tracker rate on the expiry of the fixed rate while others would have been given a variable rate. In many cases, it was simply the toss of a coin or random selection and people did not put too much thought into it. It is unfair that one section of society and one group of home owners are subsidising the banks.

Lest anyone thinks that this is rushed legislation or that we need to delay it, I note that the Bill was already before the House during the last Dáil. I worked with Deputy Michael McGrath on this and other mortgage issues. The Minister, Deputy Zappone, will remember some of those issues were brought before the last Seanad. Working out a model of how to do this without having the Minister for Finance in the position Ministers for Finance were in historically to adjust a rate, was very difficult. It was difficult to work out a model which would protect the competitiveness of the banking market and protect home owners. Deputy Michael McGrath has been working on this for at least four years and it has been difficult. What we have come up with is the idea that if the Central Bank deems there to have been a market failure and that there is no competition in the market or barriers to entry are interfering with its competitive potential, it must act. It is the Central Bank that will make the assessment and not any politician who will tell it to act. The Central Bank will make its own study as to whether there is a market failure and then it will act. Already, the legislation has had the effect in some quarters of pushing AIB in the right direction. It is necessary to push Bank of Ireland and others in the right direction. If there is competition in the market, this legislation will not apply. However, this is a failed and non-functioning market and no one wants to know about it except the ones who are ripping off the people and will continue to do so unless the Bill is passed.

I thank Deputy Michael McGrath for introducing the Bill again. When this idea was first floated three to four years ago, Irish banks were simply not in a position to reduce rates, whether instructed to do so or otherwise. Ultimately, the Irish banks were holding billions of euro of Irish taxpayers' money in their portfolios and unless they made a profit, they would have been unable to repay that. It is essential that we recognise that it is not four years ago any more and that our economy has changed drastically. We are now at a point where the only bank which remains largely in State ownership can, I hope, be deleveraged back into the private market over the next year or two. That is something I am happy to see. We have already seen another financial institution formerly in the 100% shareholding of the State not only return the money we invested in it but actually return a mild profit to the taxpayer. If all of the independent financial analysts are to be believed, it will be the case in the short term that the Irish taxpayer will start to see more tranches of its investment refunded.

I started out by thanking Deputy Michael McGrath for the Bill and that was sincere. It is not four or five years ago and we are in a different position. Having served as a member of the Joint Committee on Justice, Defence and Equality for the past five years, I note that we engaged in an unprecedented number of consultations with expert groups from a variety of fields under the chairmanship of Deputy David Stanton on a range of Bills which have been enacted and quite a number of others which are available for the new Dáil and Government to take up. If those Bills are taken up, they will be passed because of the work done by the committee in question which included members of the party opposite, including Deputy Niall Collins.

The reports that emanated from that committee, which engaged heavily in pre-legislative scrutiny, informed the relevant Department, be it the Department of Justice and Equality or Defence, on the nature of the changes required to the heads or drafts of Bills that were laid before it.

I accept that Fianna Fáil has made its decision and will run with it. That is Fianna Fáil's prerogative. However, and taking the politics out of it, pre-legislative scrutiny is an essential component of making good legislation. With the greatest will in the world, Deputy Michael McGrath would not have had access to the Department of Finance and its expertise. Nor would he have had access to the legal advice available to the prior Government and the Department responsible for the Bill. Therefore, I encourage Fianna Fáil to take the opportunity to run with the Bill and lay it before the relevant committee in order to ensure that the relevant stakeholders - I do not just mean the banks, but everyone - appear at the committee and give evidence so the legislation might be improved.

Questions have been raised about the Bill's constitutionality. I am not an expert in constitutional law. However, I am aware of the constitutional issues with impeding property rights and I am privy to the retrospective application of legislation on those rights. That the Bill does not contain an appeal mechanism would raise issues in respect of property rights. There is a question in law to be asked of this legislation.

I wish to raise an issue that has been mentioned often in the course of this debate.

I should have mentioned that the remainder of this time slot is being shared by Deputies McEntee and Fitzpatrick and the Minister for Social Protection, Deputy Varadkar.

I will try to be as quick as I can. The introduction of competition into the financial sector is clearly good as it gives people choices but it has been painfully slow. In all but one instance, those who have entered the market are not high street lenders. That is a major problem. Individuals' mortgages have been bought by international firms that are commonly referred to as vulture funds. Although they are answerable to business and conduct rules and the financial regulation of the mortgage market, they are not high street retailers and are not encouraging new business. They are simply trying to make as much profit as possible. Not for a moment do I believe that this is the best solution that is available to a mortgage holder in distress.

The Irish Independent ran a headline, "Reprieve in store for mortgage holders as FF snubs Noonan's plea", which was a painfully simplistic analysis of the Bill. It creates false hope among the 300,000 mortgage holders who are suffering - I include myself in that statement - under high variable interest rates.

I accept Deputy Michael McGrath's motivations. We all want to do something about high interest rates and to take a stick to the banks for not passing on ECB cuts because they are not doing it fast enough. The Bill aims to target that. I encourage Fianna Fáil, the Minister and others to negotiate a position whereby the Bill can be given the sort of pre-legislative scrutiny that is required if it is to be the best possible legislation with the best desired outcome for mortgage holders.

There is probably a consensus in the House that the banks played a significant role in the collapse of the Irish economy and subsequent problems with which we are still trying to deal. Mortgage distress and arrears comprise a major problem. There may be a view, one that might not be shared by everyone in the Chamber, to the effect that it was a deeply cynical and political culture that allowed and encouraged the kind of banking behaviour that left this country where it was. We are all anxious that, as a political system, we provide comfort, hope and, most of all, solutions to the families and individuals who were the victims of the boom and bust.

To touch on my colleagues' sentiments, while I believe in the spirit of the Bill, it is not the answer in its current format. The Bill attempts to force variable rates down closer to the European average. We all want to see that happen, but it is a quick fix and a populist option. Just because something is popular does not make it the best option for the customer in the long run. Rates are falling, albeit not as quickly as we would like. That declining trend needs to continue and we need to resist the quick fix option while continuing to encourage competition, which Deputy Farrell, now the Acting Chairman, rightly stated was moving slowly. Competition between banks through greater choice is the best way forward and will force rates down if we can accelerate it.

The Minister, Deputy Noonan, has outlined the concern that the legislation may be unconstitutional. As Deputy Thomas Byrne pointed out, many commentators, be it for their own interests or otherwise, are claiming that the Bill's measures would eliminate the prospect of new entrants into the market, stymie competition and not serve customers in the long run. Coupled with the Central Bank's statement that it will not use the powers conferred upon it by the legislation if passed, where does that leave us? It is something of a political row at the moment, but once the bun fight is over, might we take the Bill to the committee and return to our commonly held principle, that is, to ensure people find a solution to their problems, not just in the short term, but also in the long term, and tease out the challenges? Above all, consultation, collaboration and engagement with the Central Bank are a much better option and bring about better legislation.

I will be brief, as I do not have much time. Yesterday, the Minister, Deputy Noonan, was described at a committee by an unelected witness who was invited to appear before it to discuss mortgage issues as a lover of vulture funds. I am appalled by that remark about a man who provided calm, reassuring and statesmanlike leadership while dragging this country out of the mess in which we found ourselves. The committee and the House should record their disregard for the remark made by that individual.

Before calling Deputy Fitzpatrick, I presume he is sharing time equally with the Minister, Deputy Varadkar.

Yes. I welcome the opportunity to participate in this debate. I wish to put on record my full support for any sustainable measure that, if introduced, would result in a reduction in monthly mortgage repayments for any person on a variable rate mortgage. While there are some elements in the Bill that I support, overall it will not achieve what we all want, that is, variable mortgage interest rates that are on a par with our European counterparts.

As highlighted by the Minister, there are possible constitutional issues with the Bill, including the interference in vested property rights, the absence of an appeal process and the retrospective application of the proposal. As everyone knows, the agreed programme for Government committed to pre-legislative scrutiny all new Bills. With this is mind, I cannot understand what issues the Opposition has with the Bill undergoing that scrutiny.

Another important aspect that must be addressed is that the independence of the Central Bank must be respected at all times. The Governor of the Central Bank has publicly stated that he is not seeking the powers proposed in the Bill. Under the Bill, the Central Bank may only issue directions and therefore cannot be forced to take action. As such, the Central Bank does not want the powers proposed in the Bill and is not going to be forced to use them. Surely everyone can see that this can only lead to difficulties and will be of no benefit to the people whom we are trying to help. What are needed are real and practical solutions that will work now and in the future. We need more competition in the mortgage sector. By its nature, competition will reduce interest rates, since new providers entering the market will want their share of it.

In my constituency of Louth, I have often dealt with banks on behalf of constituents who found themselves in difficulty with their mortgage repayments. To be fair, I have managed to reach a satisfactory outcome for the customers in their dealings with the various banks almost every time.

Getting back to the Bill, a much better proposal would be to introduce a simplified way of switching mortgage providers. If the Bill is introduced, I fear that new providers will be discouraged from entering the Irish market.

In the long term, this will not be good for those people on variable rate mortgages. We must not, however, fall into the trap of introducing weak legislation that in the short term might save money but in the long term will cost even more. We have seen what happened in the past with the boom-and-bust policies. The people of Ireland have paid and are still paying a very high price for the boom-and-bust policies of the last Fianna Fáil Government.

I agree fully with the amendments proposed by the Minister, Deputy Noonan, and urge the Opposition to reconsider their Bill to take into account these amendments. The best solution is to introduce a more simplified and cost-effective switching procedure which will allow people to switch mortgage providers more efficiently. This will result in more innovative mortgage solutions by the providers, better competition between the providers, and ultimately a better long-term outcome for mortgage holders.

I am thankful for the opportunity to speak on this very important issue, which is of great importance to the Government. It is also of great importance to my constituents, many of whom have mortgages at a standard variable interest rate. On a rough calculation, if there are 300,000 people with standard variable interest rates, there are probably between 9,000 and 10,000 in the constituency of Dublin West.

I congratulate the newly appointed members of the Fianna Fáil Front Bench, some of whom are present, including Deputies Barry Cowen, Jim O'Callaghan and Thomas Byrne.

This considerable issue affects my peer group in particular, but by no means exclusively. I refer to people in their 30s and early 40s who bought property at a time when it was very expensive. Deputy Darragh O’Brien spoke of being in this position himself. I am very conscious of being one of the lucky ones with a tracker mortgage, the interest rate relating to which is now approximately 1.1%. Others in my peer group, including friends and family who bought at the same time at a standard variable rate, pay at a much higher interest rate. Research shows that interest rates in Ireland are pretty much at the European median, but the difficulty is caused by the fact that some are on tracker mortgages and are therefore benefiting, while others are on standard variable rates and are therefore losing out. There is an injustice and unfairness in this that we can all recognise and identify.

I acknowledge the bona fides and interest of Fianna Fáil in this issue, and Deputy Michael McGrath in particular. He has focused on it for a number of months, or even years. Even just focusing on it has helped to exert downward pressure on rates. It is important to acknowledge that.

There have been many actions by the Government, and by the Minister for Finance, Deputy Michael Noonan, in particular. They include meetings with the lenders in May 2015 and again in September 2015. Figures from the Central Bank of Ireland, issued on 13 May this year, indicate that variable rates went down quite significantly in the period gone by. Just last week, AIB reduced its rates by 0.25%. Of course, privately owned and foreign-owned banks have been less forthcoming in reducing rates.

There is a problem, and we all agree on that. It has an impact on my Department. We still have roughly 3,000 people in the closed mortgage interest relief scheme. People on rent supplement are obviously affected by rent costs, and there is also a significant impact on household budgets.

The question we have to ask, as politicians seeking solutions, is whether the solution is more regulation, more competition or some combination of the two. My view is that the best solution is more competition. This entails new lenders in the market, or new banks willing to come to Ireland to lend and facilitate people in transferring mortgages. The question we must ask ourselves is whether this Bill would help or hinder in encouraging greater competition and bringing more banks and lenders into the market. There is a risk that it could be a hindrance.

Any time we debate a new law in this Chamber, we must always be aware that we are actually debating two laws, the law before us and the law of unintended consequences. In this case, there are potential unintended consequences. As others have mentioned, there are questions about the constitutionality of the legislation and how it might affect property rights. There is a potential impact on existing contracts and the very bad precedent that could be set by passing legislation that interferes with existing contracts.

The minimum wage.

There is, for example, the failure to consult the European Central Bank, which is required under Article 127 of the Treaty on the Functioning of the European Union, and policy risks have been outlined by previous speakers. There is a possibility that the legislation could increase the cost of funds, thus making fewer mortgages available, particularly to people who want to buy for the first time. It may actually increase rates for others. There is a possibility that, even if the legislation is not passed, it might deter new banks and potential competition from coming into the market, as they would be uncertain as to what the Legislature might do. Anybody developing a business plan — most Members have probably produced one at some stage — would probably, even today, write this Bill down as a risk, resulting in uncertainty about whether they would enter the market and offer a more attractive mortgage rate than is currently being offered. That is exactly why this is the kind of Bill that should be subject to pre-legislative scrutiny. That is what is envisaged in the programme for Government and in the Dáil reforms that have been agreed tentatively by the various parties across this House. It is through pre-legislative scrutiny that we can actually tease out these issues. Once the office is set up, we can get the advice of the Parliamentary Legal Adviser on questions of contract law constitutionality and so on.

Since I have been a Member of this House, there has been a lot of talk about the new politics, but the talk is over now because of the circumstances in which we find ourselves and the result of the election. Whether we like it or not, we will all have to accept and embrace a new form of politics, simply because the Government is now a minority in this House and the Opposition combined holds the majority. For a new politics to work and for a minority Government to work, no matter who leads it, a different type of Government will be required. It will also require a different type of Opposition. It requires a Government that will respect the Dáil and not treat it as a rubber stamp, control it and bypass it but, rather, engage with it. It also requires an Opposition that respects the Dáil. That means not putting forward legislation to gain publicity or to highlight an issue because the Opposition no longer has the protection of knowing that a Bill might be referred to committee and buried there. There is a serious risk that, in this new Dáil, bad Bills could actually become bad laws, with negative consequences for citizens. That is something we should guard against. That is why it is very important that any Private Members' Bill be subject to legal advice and legislative scrutiny before it comes to the House. Bills should be fit for Second Stage and Committee Stage before they are brought to plenary session in this House. That is an important change that needs to happen in the next few weeks.

I commend Deputy Michael McGrath on his introduction of this Bill and thank him for allocating some of his time to me in order to speak this evening. In the brief time I have, I want to address three issues that were identified by the Minister and Government spokespersons during the course of the debate today and last night. The first issue I wish to deal with is the statement made by the Minister for Finance yesterday that, as a result of the publication of Deputy Michael McGrath's Bill, there was a 10% drop in the share values of Irish banks in our Stock Exchange. That was an unfair criticism, and may have been an inaccurate one. I decided, therefore, to ascertain when Deputy McGrath actually published his Bill. It was on 12 May 2016. I decided to determine the condition of share prices in the Irish banks in the week prior to that and I noticed they were in decline then. In fact, on 6 May, Irish bank shares had declined by over 3%. I looked for a market assessment as to the cause of this decline, and I looked no further than The Irish Times, which reported that bank shares were "lower in ... trading in Dublin as investors digested the draft programme for government", which was a surprise to me in light of what the Minister said last night.

I acknowledge that it is difficult at times to isolate the reasons a share will rise or fall in value, but it is an unfair criticism to say Deputy Michael McGrath's Bill has resulted in a decline of 10% in the value of Irish bank shares. It would be even more frightening, however, if what the Minister said were, in fact, true. It would reveal the extent to which Irish banks are making huge profits off the backs of people on variable mortgage interest rates. It would show that 10% of the share value of the Irish banks declined because of a proposed change to the variable mortgage interest rate through legislation in this House.

It is important that all Deputies realise that the House should not be concerned about the impact of legislation on share prices. It is not the function of the Oireachtas to have an interest in the share value of companies listed on the Irish Stock Exchange, irrespective of whether the State is a shareholder in the entities in question. The primary function of this House must be to introduce legislation that is in the interests of citizens, rather than the specific shareholders of any publicly listed company.

The issue is what can be done with the 300,000 people who are on variable interest rates and find themselves in an appalling position. The argument from the Government appears to be that they should wait until such time as the banks indicate they have accumulated sufficient profits from such people to reduce their variable interest rates. We know this will not happen. The whole purpose of having a legislative body is to be able to regulate and change the behaviour of individuals and corporations when we believe their actions are detrimentally affecting other citizens.

The Minister and other Government Deputies frequently stated there were constitutional issues with the Bill. I note that neither the Minister nor any of the other Deputies in question stated the Attorney General had advised them expressly that the Bill was unconstitutional. Instead, it was stated that commentators had raised concerns about the constitutionality of the Bill. The House cannot be guided by the concerns expressed by commentators. More specifically, the Government cannot be guided in terms of its legal advice by such commentators. The Attorney General is the constitutional officer who is required to give advice to the Government on legal matters such as the constitutionality of Bills. It is instructive that the Government has not at any stage stated that the Attorney General has advised that the Bill is unconstitutional.

I propose also to deal with another issue raised by the Minister and Government Deputies, namely, that the Central Bank is not seeking the power provided for in the Bill. I remind the Government that it is not for the Central Bank to decide what powers it is or is not given. It is a function of the House to decide what powers the Central Bank should have. We can decide to give it mandatory or discretionary powers, but it is up to us to decide what powers it has and should exercise. It is not tenable for the House to state that statutory bodies should be able to control what powers they have. Such powers are not their responsibility and it is for the Dáil to make such decisions.

If the publication of this Bill has had an impact on banks, presumably the availability of a power to intervene will similarly have an impact on the banks that have dug their heels in. I note banks have reduced their interest rates and I hope the progress of this Bill through both Houses will allow them to reduce those rates even further.

I welcome the opportunity to speak on the Fianna Fáil Party Bill which aims to reduce standard variable rates on mortgages. The Bill provides an opportunity to give protection to consumer interests, something which has been very much lacking. I commend Deputy Michael McGrath on introducing this intelligent, thought-out and people-centred Bill and, in particular, his tenacity in driving it forward and refusing to give up.

More than 300,000 households and up to 500,000 people will benefit from this legislation if it results in a reduction in standard variable mortgage rates. These are people who are overpaying for their mortgages, the single largest outlay for families. Householders earn an income, pay taxes on it and bring it home to sustain their families. However, they are being ripped off by banks through the interest rates being charged and this practice has been allowed to continue.

The purpose of the Bill is to achieve fairness for families. The same banks that were saved by taxpayers continue to profit off the backs of struggling and working families. They are charging up to six times the cost of funds for their standard variable rates. When people fall into arrears the rates are increased through levies, resulting in the mortgage holder falling further and further behind on their payments. The banks have had time to take action in the interests of consumers but have shown no concern, interest or inclination to do so. The time is up and the House has a duty to step in.

The Oireachtas is meant to act as a buffer and protect citizens against powerful interests. Instead, too often, the Deputies opposite have become sales representatives who seek to justify and explain to people the reasons they have to suck it up.

If passed, this Bill will hang a sword of Damocles over the heads of banks that fail to fulfil their duty to act in the interests of their customers. In particular, it will put a brake on vulture funds which, with house prices increasing, have a perverse incentive to increase interest rates and force defaults in order that they can sell properties and profit from their sale. A quick buck is their aim.

The Government has sought to deny that there is a problem, delay action and discredit the Bill by raising vague constitutional issues and engaging in scaremongering. The Central Bank has stated it does not want the powers provided for in the Bill. It is not for the Central Bank to make such a statement. It has a role in protecting consumer interests.

The Bill is necessary because the market is failing and working families are paying for this failure. It is time the House started to represent the interests of citizens again. I hope this Fianna Fáil Bill aimed at reducing variable mortgage interest rates will start a process of changing the mentality in the House such that it begins again to serve the interests of citizens.

I thank every Deputy who contributed to the useful and constructive debate in the House over the past two nights. I acknowledge again the presence in the Gallery of members of the fair mortgage rates campaign group which has been lobbying and campaigning on this issue for some time.

Deputy Jim O'Callaghan raised a number of the issues arising from the Minister' speech last night, which I had intended to address. The Minister and other Government Deputies referred to an alleged constitutional question surrounding the Bill. It is most bizarre, given that when we had a full Second Stage debate on an identical Bill last July, not a single reference was made to a possibility of it being unconstitutional. It is instructive that the words "Attorney General" have not even been uttered in the context of references to the constitutionality of the Bill. I take that as meaning something and that this issue was raised for whatever purposes at this stage.

I have a great deal of respect for the Minister. However, his statement last night that the "day Deputy Michael McGrath republished his Bill, Irish bank shares went down by 10% across the line" drew a clear inference that there was a direct correlation between my party promoting this Bill and Irish bank share prices. When Niall O'Connor, a journalist with the Irish Independent, asked the Department to provide evidence to back up this statement, he was provided with a spreadsheet showing the movement of bank shares, not over one day but over 11 days. Two banks in particular were cited, namely, Bank of Ireland, where the share price movement of 2% took place over 11 days, and Permanent TSB which experienced an 11% fall in its share price, albeit not on the day the Bill was published but on the day it issued a trading statement providing an update setting out the serious challenges the bank is facing, none of which relates to the publication of the Bill before us. While I respect the Minister, his statement was below the belt, uncalled for and inaccurate.

The Minister for Social Protection, Deputy Leo Varadkar, made some generous comments but also stated that the Opposition should not publish Bills to gain publicity or highlight an issue. That is not what we are doing. We wish to legislate in a responsible manner and we will not be in any way irresponsible in this Dáil. If the Bill passes Second Stage tonight, which I sincerely hope will be the case, it will receive detailed and line by line scrutiny on Committee Stage. All Deputies should work together to make this legislation as good as it possibly can be.

I will engage with the Central Bank and having spoken to Central Bank officials, I am aware of its views. I have agreed to meet and engage further with officials and I will also engage with the banks. However, I will also continue to engage with ordinary mortgage holders, as I do every day, who are stuck paying unsustainable and unjustifiable standard variable interest rates.

While the Bill is not perfect, it has been constructed with the genuine intention of seeking to apply downward pressure on standard variable mortgage rates.

It is a matter for the House to take a view on the Government amendment which would defer the passage of this Bill on Second Stage for a further six-month period. That would be six further months that mortgage holders in this country would have to pay mortgage rates that are simply indefensible. I genuinely wish this Bill was not necessary, but the banks have brought this on themselves through their actions. If they do not want this House to legislate on interest rates or to provide extra powers to the Central Bank, they know what needs to be done. That is the bottom line in regard to this debate.

There has been some progress and the Minister has contributed to that through his meetings with the banks. He has also issued what could be regarded as veiled or direct threats to banks around the actions he is prepared to take in the event of there being insufficient progress. However, we cannot ignore the reality. We cannot ignore the discrimination that continues against existing customers vis-à-vis the offers being offered to new customers. That is not a sustainable position.

From my perspective, the Minister should embrace this Bill. He should use it as leverage to bring about further downward pressure on interest rates, because they are unjustifiable. Even today, despite the progress through the announcement by some banks of rate reductions, a bank in this State 14% of which we own, is charging a standard variable rate that provides for a margin of 460% above its cost of funds. That is economically unjustifiable and indefensible. There may well come a time again when standard variable rates of 4% or 5% are justifiable. If the ECB increases its rates or market conditions change, the reality will change. However, my point has always been that standard variable rates should move in line with market conditions. Market conditions for banks have never been better in terms of an ECB base rate of zero, paying little or nothing to depositors and savers and availing of historically low interest rates on the interbank and wholesale markets.

This is not about a political victory. I take no pleasure in the possibility of the Government losing a vote. If there is a vote tonight, it is not about that. We need strong banks, healthy competition, new entrants and credit unions to be given more resources and greater capacity to extend mortgages. This Bill is about acting for the common good and securing a fair deal for mortgage holders. I commend the Bill to the House and hope it passes on to Committee Stage where it can receive the detailed scrutiny it deserves. I hope also that over the course of the next few months, we will see much more progress on interest rates.

I am not pressing the amendment.

Amendment, by leave, withdrawn.
Question put and agreed to.