This year’s budget could include measures to help people who have had increased mortgage costs due to interest rate rises, Minister for Housing Darragh O’Brien has said.
His remarks come ahead of an expected further increase in interest rates after a meeting of the European Central Bank (ECB) on Thursday.
In recent weeks Sinn Féin has been putting pressure on the Government to bring back mortgage interest relief to aid households with the increased costs.
Mr O’Brien did not say what measures the Government is looking at introducing, but he signalled that help for mortgage holders could be forthcoming in October’s budget. He said the Minister for Finance Michael McGrath set out the Government’s view on the ECB last week suggesting it would “have to take into account the effect that the interest rate increases are having on normal people out there”.
Interest rate increases affect those on variable and tracker mortgages, said Mr O’Brien said. “We will be looking at this with bringing forward measures potentially in the budget this year.”
Speaking on RTÉ Radio One’s Today with Claire Byrne Show, the Minister said there could not be a “knee-jerk response”.
He accused Sinn Féin of “calling basically for a budget every month” last year amid the cost-of-living crisis, and said this would lead to “instability”.
Mr O’Brien argued that the Government “got the package right in relation to cost-of-living” last winter. “I’m confident that we will get that right in [the budget in] October this year to be able to help people who’ve seen increases in mortgage interest rates.”
He said the “vast majority” of new mortgages in recent years have been on fixed rates but those on variable and tracker mortgages “are really feeling the effect of a 3.5 per cent increase since the increase of interest rates began”.
He said: “We’re committed to helping people in that space like we did in the cost-of-living.” The Government needed to make sure that what is brought forward is effective, properly costed and affordable “but we are working on it”.
Sinn Féin tabled a motion last week calling for a “targeted and temporary mortgage interest relief” up to a maximum of €1,500 per annum. The party’s finance spokesman, Pearse Doherty, suggested such a scheme – to be in place until the end of the year – would cost €400 million and called it a “sensible and necessary proposal” that could “provide meaningful support to households at the sharp edge of interest rate hikes”.
Mr McGrath tabled an amendment to the motion – which was subsequently passed in a Dáil vote – that included a line saying that the reintroduction of mortgage interest relief – even on a selective or tailored basis – “is likely to involve significant costs and needs to be considered, not on an ad hoc basis, but in the context of a range of other cost-of-living measures being provided”.
Mr O’Brien defended the Government’s response to the housing crisis saying “we are committed to helping people”.
He said he wanted it to be easier for people to buy their own home. This was a big challenge and the first-time buyer measures were taking hold, but there were some external measures that the Government could not control, which was why it had to be flexible in its response.
Later the issue of mortgage interest rates and non-bank lenders was raised at Fianna Fáil’s private parliamentary party meeting.
Non-bank lenders are commonly known as vulture funds and they have come in for criticism in recent times for the high interest rates charged to customers.
Mr McGrath gave an update on his meetings with the banks and non-bank lenders and the need to assist those struggling with their mortgages.
The Minister also said he met recently with the Central Bank and will continue to engage with the banking sector.
According to sources, Mr McGrath said he fully understood the pressure recent ECB rate hikes had placed on some mortgage holders, and he was fully engaged with the regulator and the lenders on the issue.
He said he was aware the Oireachtas Finance Committee had invited the non-bank lenders to be quizzed and he said he has encouraged them to attend.
Mr McGrath is also understood to have said he had asked the main retail banks to come up with solutions to the situation some customers of other lenders find themselves in. He said the banks should consider making it easier for borrowers to switch back to them or they could buy back some mortgages from the non-bank lenders.
The meeting was told that the situation is a legacy of the financial crisis and there is “an obligation” on the mainstream lenders to play their part in finding a solution.
In terms of the Central Bank’s role on the issue, he told the meeting that he has asked the Central Bank to assess whether the underlying funding model for the non-bank sector warrants the high rates they are charging some customers.
Mr McGrath told the meeting he believes that there should be a distinct code of conduct on mortgage switching and that he had suggested to the Central Bank that it should establish such a code.