Lending interest rates are due to rise twice by the end of the year, with the European Central Bank (ECB) expected to announce the hikes.
The move will put extra financial pressure on tracker and variable mortgage holders who will see their monthly mortgage repayments increase.
Rates are expected to go up by 1 percentage point, or possibly 1.25 percentage points, by the end of this year, commentators have said.
This news comes amid fears that the European economy is entering a downturn.
The increased interest rates would see people on trackers and variable rates pay thousands of extra euro in repayments. The interest rates hike is also expected to push up the cost of new fixed rates.
The ECB surprised markets last month when it pushed up its key lending rates by 0.50 percentage points – twice what had originally been expected. July’s rate rise was the first in 11 years.
Responding to reports that the European Central Bank (ECB) will soon hike its lending rates twice by the end of the year, Labour finance spokesperson Ged Nash said the Government has no option but to support Labour’s legislation to cap mortgage interest rates in Ireland.
Deputy Nash said: “People are already being hammered by the cost of living crisis. So the news that the ECB intends to hike interest rates twice by the end of year will come as a body blow to nearly half a million households with variable mortgages who are already struggling to make ends meet.
“The Labour Party has the legislation to take the heat out of this and to relieve some of the financial pressure people. Our Central Bank Variable Rate Mortgages Bill would enable the regulator to impose caps on mortgage interest rates charged by the banks where a market failure is shown.
The legislation draws inspiration from a Bill tabled by the Minister for Public Expenditure & Reform, Michael McGrath when he was Fianna Fáil spokesperson on Finance. If his Bill was necessary when he was in Opposition and in an era of low interest rates, he surely must agree that it is needed now with two further ECB interest rate hikes on the way.
“The Oireachtas has already imposed a cap on the interest rates on moneylenders, so there is a strong precedent for action. This shows there is no constitutional impediment to enable the Central Bank to intervene in the market and introduce reasonable caps on interest rates charged by financial services providers. The only impediment is a lack of political will," Deputy Nash said.
“A cap on mortgage interest rates will save families thousands of euros over the lifetime of their mortgages and keep more money in people's pockets. The Government must do all they can to cushion this body blow.
“With the second highest mortgage interest rate in the eurozone, Ireland is already well out of sync with our EU peers. Now is the time to send a strong message to the banks that they must quickly chart a course towards the EU average of mortgage interest rates,” Deputy Nash added.
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