Interest rates for mortgage holders should be capped at 3%, People Before Profit has said.
Yesterday, the European Central Bank raised interest rates to 4% - an all-time high.
The increase was the tenth in just over a year, with the bank insisting it was necessary to reduce inflation to the bank’s target of 2% across the eurozone.
Speaking to Newstalk Breakfast, People Before Profit TD Paul Murphy said the interest rate hikes were hurting ordinary homeowners and the Government should intervene.
“We’re proposing that mortgage holders need to be protected from the increase in interest rates,” he said.
“People will have woken up to hear the news about the ECB increasing interest rates for the tenth time in just over a year.
“This is being passed on by the banks at huge cost to ordinary people.
“So, people who are faced with paying thousands of euro extra on groceries, electricity on heating, on fuel are also being faced with paying hundreds of euros a month extra on mortgages.
“About one-in-five mortgage-holding families are faced with €500 extra a month and another one in five are faced with about €300 extra a month extra.
“This is simply unaffordable for very many people and it comes at the exact same time - and for the same reason - that the banks are [reaping] unprecedented profits.”
People Before Profit will introduce a bill that, if passed, would force banks to disregard the ECB and cap interest rates for mortgage holders at 3% - significantly lower than the 4% rate set by the ECB.
“The Government gets to set the law,” Deputy Murphy said.
The Government, about a year and a half ago, passed a law to say that moneylenders couldn’t be charged more than a certain interest rate… We will be… introducing in the Dáil a bill to cap the maximum amount that banks can charge mortgage holders.
“What we propose is 3% - which is obviously higher than what some people would have been paying two-years-ago - and that’s in a context of when the banks have been making absolutely enormous profits and people are facing a cost-of-living crisis.
“So, it’s to shield people from the impact of this.”
'What we want is competition'
AskAboutMoney.com founder Brendan Burgess described it as a “mapcap idea” that would damage the economy in the long-term.
“It frightens away potential new entrants into the market,” he said.
“The biggest interest on mortgage rates in this country in recent years has been the arrival of a new lender.
“They came in and they offered cheaper rates than the existing banks - the AIB and Bank of Ireland - and the other banks had to stop increasing rates or to reduce their rates accordingly.
“What we want is competition and we want fair competition.”
Ahead of yesterday’s rate rise, economist Austin Hughes said the ECB would likely cut interest rates “very fast” in the near future as inflation falls.
Main image: Split of the ECB and Paul Murphy