Michael McGrath, the Minister for Finance, wants a formal response from the Central Bank to a letter his officials wrote to the regulator asking whether it needs more legal powers to help tens of thousands of mortgage holders who are trapped paying high interest rates to overseas funds.
Speaking to The Irish Times in London following meetings with political and economic leaders there, Mr McGrath confirmed that he raised the issue of people stuck in overpriced mortgages with Central Bank governor Gabriel Makhlouf in a meeting on Tuesday evening.
The Minister says he is “concerned” for such mortgage holders, many of whom are trapped in rates that are double the market average and can be as high as 7 per cent. About 100,000 borrowers who took out their loans years ago with mainstream banks, and who later fell into difficulty, had their loans taken over by such funds, which are often referred to as “vulture funds”.
Over the past year since European Central Bank rates started rising, most of these funds have cranked up the cost of their mortgages at a far quicker rate than mainstream banks, putting these borrowers in even greater jeopardy. The Central Bank estimates that about 38,000 borrowers are stuck paying the premium rates and are mostly unable to move back to mainstream banks because of their chequered borrowing history.
Mr McGrath said his officials wrote to the Central Bank ahead of Tuesday’s meeting setting out his “concerns”, and asking for its views about “its powers and functions” and how customers on top rates can be “protected as far as possible”.
[ Central Bank denies deserting vulture fund mortgage customers as rates soarOpens in new window ]
In response to calls for it to introduce interest rate caps, the Central Bank has repeatedly said it has no legal mandate to interfere in the setting of interest rates by lenders. The Minister said he has no indication that the regulator wants additional powers “at this point in time”.
“But we have written to [Central Bank regulators] asking them for their views in relation what they can do to assist mortgage holders who are now facing a significant hike in their interest rates. We await their formal reply and we will continue to engage with them,” he said.
He said he did not want to see the recent trend of falling home loan arrears “going into reverse” because people trapped in overpriced mortgages with funds are tipped over the edge.
“It remains a live issue,” he said.
Mr McGrath met the UK chancellor of the exchequer, Jeremy Hunt, while on his two-day trip to London. He said the meeting was “warm” and they discussed global economic outlook and also the ongoing talks between the UK and the European Commission over the Northern Ireland protocol.
“It is important to send out a high-level political signal from the Irish Government, and from the UK government, that there is a strong desire to reach an agreement,” he said.
He also met Bank of England governor Andrew Bailey, Labour shadow chancellor Rachel Reeves and the lord mayor of the City of London, Dubliner Nicholas Lyons.
