Solutions must be found at home and abroad to bring Ireland’s mortgage interest rates in line with the EU average, according to Fianna Fáil MEP.
The average mortgage interest rate in Ireland is now 2.9% per year – more than double the EU average of 1.3%.
On The Pat Kenny Show this morning Ireland South MEP Billy Kelleher said Irish banks are struggling are still struggling under recession-era regulations.
Meanwhile, he said, European banks do not want to expand to Ireland, due to the size of the market, the banking system and legal difficulties with evictions when homeowners default.
“Overall, we have a challenge because of the collapse of banking system in Ireland from 2008 right through to 2010,” he said. “European regulators are still obligating Irish banks to hold large amounts of capital when lending.
“That is putting them at a disadvantage competitively visa vi other European banks.”
The European regulations mean Irish banks must maintain around “three to four times the capital of the average European banks,” said Mr Kelleher.
He said the Irish system also makes it extremely difficult for banks to repossess property when people default – and warned that this cost was being passed on to other mortgage holders.
“At some stage there has to be an end of the road for those who are making no effort to pay,” he said.
“What is happening of course is that the legal system is very complex in Ireland and it takes a very long period of time before you exhaust all legal avenues and eventually repossess.
“In Europe, repossessions happen very, very quickly. Now I am not advocating for quick and easy repossession but there has to be some way of guaranteeing that if you do not make any effort to pay a mortgage there has to be repercussions.”
Mr Kelleher said that, on a €225,000 mortgage, the average Irish person is paying €2,000 per year more than their EU neighbours.
“That puts us at a competitive disadvantage as an economy and as a people, because we are competing within the European market as well,” he said.
“So, we need to address the home repossessions but that is just one particular facet. The other part is that the banking authorities in Europe are obligating Irish banks to retain additional capital buffers which is putting huge pressure on their profitability as well.
“So, there are both national issues as well as European issues that have to be resolved because at the end of the day, it is the mortgage holder who is paying for all of this.”
He said there is now a “certain understanding” at European level that the disparity cannot continue.
“There is a spotlight being shone on it,” he said. “We have the reasons why; we have identified them and we need solutions both domestically and at the European level.”