Taoiseach says banks have moral duty to pass on lower interest rates

Banks had a moral duty to pass on lower interest rates from which they benefited, Taoiseach Enda Kenny told the Dáil.

“It is not fair, just or equitable that Irish consumers are being charged higher interest on variable-rate mortgages than their counterparts elsewhere in the euro zone,” he said.

Mr Kenny said the Government and Central Bank governor Patrick Honohan were focused directly on carrying out further work in that area.

The Taoiseach was replying to Fianna Fáil leader Micheál Martin, who said more than 300,000 households were on standard variable-rate mortgages. These were clearly exorbitant and exerting enormous pressure on people, he added.

It was clear, said Mr Martin, that the rates being charged were far in excess of the cost of bank funds.

A typical €200,000 standard-rate mortgage holder, for example, would pay €6,000 more annually than a borrower with a tracker mortgage.

“I am sure the Taoiseach will agree that this is simply unsustainable,” he said.

Mr Martin said it was difficult to justify the high rates on standard variable rate mortgages when one looked at the cost of funds.

AIB was charging 4.15 per cent and Bank of Ireland and Permanent TSB were each charging 4.5 per cent. But the cost of funds was 1.64 per cent, 1.15 per cent and 1.74 per cent respectively, he said.

“The variation is huge and is in stark contrast to other euro- zone countries,” Mr Martin added.

He called on the Government to say what it was proposing to do “to alleviate the enormous, unacceptable and unfair pressures” on the families involved.