Monday 24 October 2016

Dan White: Michael Noonan must force banks to slash their extortionate rates


What part of 'no' does Minister Michael Noonan not understand?

Despite repeatedly calling on them to cut their variable mortgage rates, the banks have largely ignored the demands of the Finance Minister.

Only one bank, AIB, has cut its variable mortgage rate - by a measly 0.25pc - while the others have shown the Minister the metaphorical two fingers.

The audacity of the banks is breathtaking. After going bust and costing the Exchequer €64bn to fix they are now refusing to cut their variable rate mortgage customers any slack.

Time was when the banks charged their variable rate mortgage customers 1pc-2pc over the official ECB rate.

With official ECB rates now at a record low of just 0.05pc this should mean variable mortgage rates of somewhere between 1.05pc and 2.05pc.

Not anymore.

The latest Central Bank statistics show that the average variable mortgage rate charged by the banks stood at 4.1pc at the end of June.

This means that the banks are on an average margin of more than 4pc over the official ECB rate for variable rate mortgages. Such an interest margin would have been regarded as utterly excessive even a decade ago.

The extortionate margins being earned by the banks on variable rate mortgages is a reflection of the lack of competition in the Irish market.

Halifax/Bank of Scotland pulled the plug on its Irish operation in 2010, Danske exited Irish retail banking in 2013 while both KBC Bank and RBS (which trades in this country as Ulster Bank) are reputed to be examining the future of their Irish operations.

This lack of competition means that variable rate mortgage customers are stuck with their existing bank.

No matter how badly the banks treat them, they have no option but to stay put.


The remaining banks have exploited their position, which is effectively a monopoly, ruthlessly.

And what has been the response of the Minister for Finance to the banks' anti-competitive exploitation of their monopoly position?

Has he perhaps threatened ask the Competition and Consumer Protection Commission to investigate the banks' behaviour?

If he feels that existing competition law is too weak, maybe he has threatened tougher legislation to bring the banks to heel and rescue variable rate mortgage customers from their plight?

Not a bit of it.

Instead of threatening to come down hard on the banks the Minister is due to meet with them over the next few weeks, where no doubt the Minister and bankers can enjoy a nice cuppa together.

What a complete and utter waste of time.

When will the Minister stop the banks behaving like complete bankers in their treatment of their variable rate mortgage customers?

What is he afraid of?

If we learned anything from the banking crisis it should be that these individuals aren't masters of the universe.

The banks don't even have the old post-crash excuse about having to pay way over the odds to attract deposits from savers worried about their solvency any more.

The latest Central Bank figures show the banks are now paying between 0.24pc and 0.58pc on most short-term deposits, meaning that the banks are now treating their depositors almost as badly as their variable rate mortgage customers.

Michael Noonan has been molly-coddling the banks for long enough.

As someone who will have to face the voters within the next seven months he should need no reminding that variable rate mortgage customers and their families are as mad as hell and that, if something isn't done and quickly, they will take out that anger at the ballot box.

The time for meetings has long since passed.

If the banks are not prepared to voluntarily cut their variable mortgage rates by a significant amount, at least 2pc, then the Minister must be prepared to force them to do so.

If that means that the banks' expensive tea sets end up being smashed all over the place then too bad.

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