FINANCE MINISTER MICHAEL McGrath told bankers and vulture funds today of the “imperative” of supporting mortgage holders through the period of increased interest rates.  

The minister met with representatives of the banking and mortgage sector, including the CEOs and senior representatives of the retail banks, retail credit firms and credit servicing firms to discuss the measures they can take to assist customers at this time of rising interest rates. 

The Banking and Payments Federation Ireland (BPFI), the Central Bank of Ireland, Citizens Information Bureau (and its Money Advice and Budgeting Service) and the Insolvency Service of Ireland were also represented.

Now at 4.25%, the European Central Bank’s main rate for pricing mortgages is the highest it has been since May 2001 after nine consecutive hikes.

The immediate impact of these rises has been felt by mortgage holders on variable and tracker rates and by any homeowner who has reached the end of their fixed-rate term.

First-time buyers are also facing significant increases in their monthly mortgage payments as a result.

Mortgage holders trapped with vultures

On top of this, some 60,000 mortgage holders whose mortgages are owned by vulture funds are unable to switch to high-street lenders and are stuck on rates as high as 10%.

Vulture funds hold the the mortgage contracts of around 85,000 Irish households.

As financial expert Mark Coan recently wrote in The Journal, many assume that the mortgages in this situation have ‘gone bad’, in reality only around 20,000 of them are currently behind in their repayments.

In fact, many people with the vulture funds have never been in any financial trouble, ending up with the funds through sheer bad luck. A sizable group of these customers, over 30,000, are simply with these funds due to the loan sales.

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In a statement after today’s meeting, McGrath said there was a need to ensure the financial system identifies how consumers could be better supported at this time. 

He said there is the “potential for greater coordination by firms including in the area of switching, and where the information provided to consumers, and the options available to them, could be enhanced”. 

“I am acutely conscious of the impact that rising interest rates are having on mortgage borrowers. Many mortgage holders have been in direct contact with myself, my Department and political colleagues, sharing their own personal story and I know that many are worried about their ability to pay their mortgage now and in the future,” said the minister.

Meeting with bankers 

McGrath said he heard first hand at the meeting today from MABS and the Insolvency Service of Ireland about the “real life examples they are dealing with and the increased demand for their services generally”. 

“I believe that the vast majority of mortgage holders in Ireland are making a genuine effort to pay their mortgage.

“There are supports available and with the rapid change in the interest rate environment, industry must engage with their customers to prevent them falling into arrears.

“For this reason, I invited the banks, the non-banks and key stakeholders to a meeting today to discuss the imperative of supporting mortgage holders through this period of increased interest rates,” he said. 

With just over a month out to budget day and with the minister already stating publicly that interventions are being considered, McGrath said:

“It will now be necessary for the industry to demonstrate that they are delivering for borrowers in difficulty with supports and certainty, and developing long-term sustainable solutions for borrowers.

“I have asked the industry representatives to reflect on the discussion today and to set out their response as a matter of priority.”

Speaking at today’s roundtable meeting, Deputy Governor for Consumer and Investor Protection Derville Rowland reiterated the need for industry to support those mortgage holders affected by increasing costs of living and increasing interest rates.

This includes potential greater coordination by firms on switching and providing enhanced information to consumers on the options available to them, she said.

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Representatives from the Central Bank of Ireland were also in attendance at today's meeting with the minister Alamy Stock Photo Alamy Stock Photo

Deputy Governor Rowland stated that firms must be proactive, responsive and coordinated, and that expectation was reinforced at today’s meeting.

The Central Bank of Ireland said it would continue its phased work to scrutinise firms to ensure that those borrowers who should expect to be able to switch product or provider are supported to do so, and those facing financial difficulties are supported with alternative repayment arrangements, where appropriate, and that the regulatory framework we are charged with supervising is operating as expected.

Speaking after meeting Brian Hayes, Chief Executive of the Banking & Payments Federation Ireland (BPFI), the group that represents the banking sector said:

“We very much welcome the discussions with Minister McGrath today which were both open and constructive and focused on the important role the industry is playing in supporting customers through the current cost of living challenges.” 

“BPFI and its members have been working closely with the Department of Finance, the Central Bank of Ireland and other key stakeholders and will continue this engagement in the months ahead to ensure our collective efforts are fully focused on providing the help and support borrowers need in this difficult economic environment.”

Bank profits

The meeting today comes after Higher Education Minister Simon Harris hit out against the banks for being slow to pass on higher interest rates for savers. 

“The reality of the situation is that banks want to have a conversation about mortgage rates on one hand and interest rates in the other. That’s fine. There’s another leg of that stool. It’s called profit levels.

“And I believe in profit, profit is a good thing. Profit is very important in a capital society. But profit is meant to be based on ingenuity, it is meant to be based on hard work, it’s meant to be based on innovation, it is meant to be based on new products. It’s not meant to be based on just being in the right place at the right time when there’s an inflationary crisis, the worst since we’ve seen since perhaps the 1970s,” Harris told reporters yesterday. 

He said the “elephant in the room” is that there is a certain small number of sectors that able to profiteer during the cost of living crisis.