Minister for Finance Michael Noonan insists he has no plans to implement legislation to compel lenders to reduce their standard variable rates but will keep the matter “under review.”
Responding to a query from Deputy Aodhán Ó Ríordáin in the Dáil last week, the Minister said that he was confident that the Central Bank would engage with lenders on the matter to encourage them to pass interest rate cuts on to mortgage holders.
The latest ECB rate cut at the start of November of 0.25% was only passed on to mortgage holders by a handful of lenders and there are fears that the financial institutions will continue to hold off on passing on future cuts, three of which are expected between now and next March.
Speaking on the government’s stance on the matter, Minister Noonan said: “Neither the Central Bank nor I, as Minister for Finance, have a statutory role in the setting of interest rates charged or paid by financial institutions regulated by the Central Bank. Based on the recent advice received from the Central Bank, I have no plans to recommend to Government that legislation be introduced to compel lenders to reduce their standard variable rates. The question of how interest rates paid on deposits should be treated would also have to be considered in the context of such legislation. However, I will keep the matter under review.
“The Central Bank have informed me that, using their existing powers, they will engage with lenders which appear to have standard variable mortgage rates set disproportionate to their cost of funds. Credit institutions are not primarily or always funded from the ECB, but rather from a number of sources.”