Michael McGrath to reintroduce bill to give CB power to control rates

[tonymac]

I see articles on the front page and page 16 of the examiner about FFs introduction of legislation. The headline says FF VOWS TO FORCE BANKS TO CUT HOME LOAN RATES. As I said in one of my postings we are being gouged more than any other eurozone country on rates, we bailed out the banks, who else did that and now we're making an inordinate, unfair contribution to their profits. They are and continue to abuse their position and as a consequence they deserve to be checked and forced to act. A law to this effect should force them to act due to their lack of manners.The point I'm making is we are different to most other countries for the reasons outlined above and a different response is required in the interests of fairness.The issue of repossessions is difficult in fairness as for me a humane sympathetic response is required but only for the genuine cases who are making genuine attempts to pay down which this system should hopefully identify. This of course needs to be fast racked so as the ungenuine can be weeded out and the banks to be fair can go after a repossession quicker.

 

[Brendan Burgess]

From the article in the Examiner


“We will introduce legislation at the first opportunity,” said Mr McGrath.

A majority of deputies in the Dáil would now support imposing some sort of controls on mortgage interest rates because lenders are charging “excessive rates”, he said.

The legislation could be on the statute book in a relatively short period of time, said Mr McGrath.

The agreement Fianna Fáil has struck to help support a minority Fine Gael government includes a commitment to tackle high variable mortgage interest rates.

The commitment by Mr McGrath means there is likely to be swift progress over variable rates, of which Ireland has the highest in the eurozone.

 

[Brendan Burgess]

Michael McGrath has just been interviewed on the 6 1 news and he has reiterated that this new bill will be a priority for FF.

It's very hard to see how a cabinet which includes Shane Ross could veto this bill.

Even if they tried to, the rest of the Dáil would presumably vote it through.


Brendan

 

[tvman]

As with the plan to increase rent allowance to tackle the housing crisis, this will just make the situation worse. What's needed is competition and this will make it less likely that foreign/new banks will enter the market.

 

[Brendan Burgess]

FF lodged the Bill with the Ceann Comhairle on Friday evening. This gets it on the Order Paper.

The main debate will take place at the Committee Stage.

Brendan

 

[newirishman]

As with the plan to increase rent allowance to tackle the housing crisis, this will just make the situation worse. What's needed is competition and this will make it less likely that foreign/new banks will enter the market.

OTOH, we haven't exactly been inundated by new market entrants. I certainly haven't seen any foreign bank setting up shop recently.
Only new "entrant" in the mortgage space is the Frank Mortgage but it doesn't look like they are too much in a rush either, given there's no updates on when they plan to start offering loans or what the offers will be. (And I don't blame the CB that there isn't any information forthcoming).

So as apparently there is no one rushing to enter the market, we might as well get the CBI to push the rates down as apparently competition doesn't seem to do the trick.

 

[Sarenco]

OTOH, we haven't exactly been inundated by new market entrants. I certainly haven't seen any foreign bank setting up shop recently.

That might have something to do with populist politicians threating to introduce price fixing in the mortgage market and the political failure to appropriately address the extraordinarily high levels of long-term mortgage arrears.

 

[newirishman]

That might have something to do with populist politicians threating to introduce price fixing in the mortgage market and the political failure to appropriately address the extraordinarily high levels of long-term mortgage arrears.

I a not arguing with you on any of these points! But given specifically your second point - as politics is already interfering with the market, in this case by causing the lack of competition - we might as well have politics go the whole way and interfere even more. Half-way house doesn't do anyone any good (apart from those in arrears, maybe).

 

[rodger]

If Bank of Ireland which is charging 4.5% home and 5.65% investment wasn't so stubborn in refusing to lower variable rates the state wouldn't have had to take political action.

 

[Sarenco]

I a not arguing with you on any of these points! But given specifically your second point - as politics is already interfering with the market, in this case by causing the lack of competition - we might as well have politics go the whole way and interfere even more. Half-way house doesn't do anyone any good (apart from those in arrears, maybe).

The problem is that it could actually make matters worse - there is no guarantee that this legislation won't cause incumbents to exit the market with no new entrants taking their place.

 

[Sophrosyne]

FF lodged the Bill with the Ceann Comhairle on Friday evening. This gets it on the Order Paper.

The main debate will take place at the Committee Stage.

Brendan

There has been mixed reporting on this.

Is this a new Bill or a word-for-word re-introduction of the previous Bill?

If it is the same Bill then it appears to stop short of “forcing” the Central Bank to reduce interest rates. Section 5 states, inter alia:

“the Central Bank may issue a direction to a specific lender or lenders (or lenders in general) not to charge a variable interest rate or variable interest rates in respect of principal dwelling house mortgage loans generally, or specific principal dwelling house mortgage loans or categories of principal dwelling house mortgage loans, which exceeds—

(a) a rate or rates specified by the Central Bank,

(b) a margin or margins specified by the Central Bank above that lender’s cost of funds (as determined by the Central Bank),

(c) a margin or margins specified by the Central Bank above a rate set by the European Central Bank nominated by the Central Bank, and/or

(d) a proportion, being not more than one-third, specified by the Central Bank above the average variable interest rate charged in the market for comparable principal dwelling house mortgage loans as determined by the Central Bank.”


Unless, in the first sentence, “may” is amended to “shall”, then the Central Bank would not be obliged to issue such a direction to lenders.