# Labour re-introduces FF bill to cap mortgage rates



## Brendan Burgess (28 Jun 2022)

McGrath urged to back new bill to cap high variable mortgage rates ahead of ECB hike
					

Public Expenditure and Reform Minister Michael McGrath has been called on to support a bill to cap variable mortgage rates, similar to one he championed when he was in opposition.




					www.independent.ie
				




_Public Expenditure and Reform Minister Michael McGrath has been called on to support a bill to cap variable mortgage rates, similar to one he championed when he was in opposition.

The bill is set to be introduced in the Dáil today by Labour’s Ged Nash, and comes just weeks before the European Central Bank ( ) is set to launch a round of interest rate rises.

Some 200,000 mortgage holders in Ireland are on variable rates and are set to be hit with higher repayments when the ECB starts hiking its lending rate.

Variable mortgage rates in Ireland have been controversial because they are higher than in many other eurozone countries.

The legislation would give the Central Bank the power to force banks to cut their standard variable rates._


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## Brendan Burgess (28 Jun 2022)

I am disappointed with the Bill.

When Michael McGrath was in opposition, he published this bill without consulting me. 
Ged Nash did consult me a few weeks ago. 

It was deeply flawed then and I told Michael McGrath that at the time. I also told Ged Nash that. 

1) It refers to variable rates only. So no control on fixed rates.  
2) It gives the Central Bank the power to control mortgage rates. Frankly I would not trust the Central Bank given their history of lying about mortgage rates in Ireland. 

Maybe it can be amended. 

What needs to be done is very simple.

Ban lenders from discriminating between new and existing customers.  
Specifically ban cash back.

This would promote competition on mortgage rates alone and not on who can trick customers best.

Brendan


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## dereko1969 (28 Jun 2022)

I'm sure what you're saying is right in terms of flaws in the Bill but politically it's a genius move.


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## NoRegretsCoyote (28 Jun 2022)

Brendan Burgess said:


> 1) It refers to variable rates only. So no control on fixed rates.


Any cap of any sort is probably illegal under EU competition policy.


Brendan Burgess said:


> 2) It gives the Central Bank the power to control mortgage rates. Frankly I would not trust the Central Bank given their history of lying about mortgage rates in Ireland.


It would completely undermine the Central Bank's mandate to ensure financial stability. How could it (a) cap rates; (b) encourage bank-level profitability?


This is a massive exercise in populism and should be best ignored.


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## skrooge (28 Jun 2022)

I doubt it's illegal to place a CAP on interest rates... No one competes to have the highest rate. 

The UK had caps on energy price rises. I appreciate it's not a great EU example.  On one hand it helped some consumers, on the other hand it caused some suppliers to go bust. 

From an Irish mortgage provider perspective the horse has already bolted. KBC and Ulster are going. 

I don't see any reference to what the cap would have to be so expect the CBI to gleefully set a max variable rate of 100%. Everyone and no one will be happy


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## Itchy (28 Jun 2022)

https://twitter.com/jeuasommenulle/status/1541691522114019328?s=21&t=jofMttEju_teoF6Z8iazjQ
		


Well according to this, France has a legal cap on Mortgage rates which is in effect a rolling cap of 30% over the last quarters average mortgage rate on issued loans. His contention is that rates have moved so fast that French Banks will not be able to originate profitable mortgages starting in Q3. With political fragmentation in France it will be difficult to change the law.


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## Purple (28 Jun 2022)

It'll be fine. Government intervention in the financial market has always worked out exactly as intended. Just like it has in the housing market.


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## Brendan Burgess (28 Jun 2022)

Hi Itchy that is interesting. 

So, let's say in Quarter 2, the average French rate was 1.5%.
In Quarter 3, the maximum they can charge is 2%. 
But the average will be somewhat lower, say 1.8%.
Then in Quarter 4, the maximum they can charge is 2.4% 
Then in Quarter 1 c.3%

That is not a good system.

brendan


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## Brendan Burgess (29 Jun 2022)

Here is the discussion of the original Bill on Askaboutmoney 






						FF Bill to tackle mortgage rates to be debated on Tuesday and Wednesday night
					

Great news.   The bill on giving the Central Bank power to control mortgage rates will be the first bill to test how the new Dáil situation works in practice.   FF has allocated its private member's time on Tuesday and Wednesday night to the bill.  I don't fully understand the stages, but they...



					www.askaboutmoney.com


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## lff12 (1 Jul 2022)

NoRegretsCoyote said:


> Any cap of any sort is probably illegal under EU competition policy.
> 
> It would completely undermine the Central Bank's mandate to ensure financial stability. How could it (a) cap rates; (b) encourage bank-level profitability?


It could force a cap on variable rates, but most lenders would simply treat the maximum as a target and charge the most they can.


NoRegretsCoyote said:


> This is a massive exercise in populism and should be best ignored.


Agreed. Brendan is right tho - force banks to treat existing customers on the same basis as new customers and ban cashback (which justify higher headline rates and make it harder to compare different products)


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## ClubMan (1 Jul 2022)

Brendan Burgess said:


> Hi Itchy that is interesting.
> 
> So, let's say in Quarter 2, the average French rate was 1.5%.
> In Quarter 3, the maximum they can charge is 2%.
> ...


I seem to recall that the French mortgage rate model was discussed at length in at least one previous AAM thread a few years ago?

Edit: seems that there is more than one previous thread but this one seems to be one of the more comprehensive ones...





						Suggestion: Cap existing rates at 125% of the new business rate
					

Eh, mortgage rates.  Bear in mind that I'm suggesting that mortgage rates should be capped, not that lenders should be prevented from offering lower rates to more creditworthy borrowers.  In France mortgage rates are capped at 133% of the average effective rate on all outstanding mortgages in...



					www.askaboutmoney.com


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