MEP to call for mortgages with 10-year fixed rates

A Fine Gael MEP will call on banks today to develop new mortgage products in which the interest rate would be fixed for 10 years.

Brian Hayes, who was Minister of State for Finance before his election in May to the European Parliament, will tell a forum in Dublin that the introduction of long-term fixed rate home loans would help stabilise the property market.

Such loans should become the norm in the market, he will say at a conference of the Banking & Payments Federation.

“Experience should inform us that variable interest rate mortgages are a huge risk to customers. Even though tracker mortgages have proved hugely beneficial to borrowers they are no longer available to customers and of course these mortgages continue to cause losses for mortgage providers,” Mr Hayes will say.

“Mortgage holders on variable mortgages are being fleeced by the banks to make up for the losses on tracker mortgages. This is obviously unfair.

“With long term international interest rates at an all-time low, there is now a clear opportunity for mortgage providers to borrow long term and provide 10-year fixed interest mortgages at less than 3.5 per cent.

“It would be good for mortgages holders, providing them with certainty as regards payments. It would also be in the long-term interest of mortgage providers introducing a strong element of stability onto their balance sheets.”

Welcoming indications from the Central Bank that it may dilute its proposal for mandatory 20 per cent deposits, Mr Hayes will say the original plan would make a bad situation worse.

‘The other extreme’

“I think a 20 per cent deposit requirement is going from one extreme to the other extreme. Before the bubble the traditional deposit requirement was 10 per cent . I am particularly concerned about the impact a 20 per cent deposit requirement will have on first-time buyers in the Dublin area. It will act as a bar on new lending . . .

“A reasonable deposit is a sensible requirement. Capacity to pay is also critical. This is related to income levels, savings records, current rent payments, size of mortgage, length of mortgage, interest rates etc.

“For people buying a second home or for people buying to let, a 20 per cent deposit is reasonable. It is neither fair nor reasonable however to require first time buyers to come up with such a large deposit.”