Fianna Fáil has questioned Michael Noonan's claim that its new bill to regulate mortgage rates could be illegal.

Under the Fianna Fáil legislation, the Central Bank would be given powers to cap the amount banks charge for standard variable mortgages.

The party introduced the bill tonight, saying the Central Bank needs new powers to protect vulnerable customers.

The minority Government feels the proposed bill may be unconstitutional.

They note the Central Bank does not want the proposed powers, and that the ECB would also have to have a say.

The minority says it will not oppose the legislation at this stage, avoiding a defeat on the first vote of its administration.

However, Finance Minister Michael Noonan says he is worried it would actually stop interest rates coming down.

He explained: "We have the signal now that a lot of other institutions are prepared to come in and write mortgages in Ireland.

"If we get that level of competition going, that is what will put the downward pressure on interest rates, rather than the heavy-handed legislation which the Central Bank don't intend using anyway".

Fianna Fáil's Michael McGrath says it is a strange defence for the Government to offer, saying he will not accept any 'bogus' claim that the bill is unconstitutional.

"When the legislation was originally debated in July of last year, the Minister did not raise any such concerns," he argued in the Dáil tonight.

"Presumably it went to the Attorney General for advice, and no issues whatsoever around its constitutionality were raised at that stage," Deputy McGrath added.