Mortgage rate cap could ‘limit competition’, watchdog says

The watchdog has set out its concerns in a submission to the Oireachtas finance committee, which is currently considering the Central Bank (Variable Rate Mortgages) Bill 2016.

The private member’s bill was introduced to the Dáil by Fianna Fáil’s finance spokesperson, Michael McGrath, last year.

In its submission, the competition watchdog said: “Supplanting the decision making ability of banks on their lending rates with that of the Central Bank would likely increase both pricing and strategic uncertainty among existing mortgage providers and most likely render the market less attractive to new entrants.

“The risks are that caps become targets and low caps restrict credit availability to all but those representing the very lowest risks to the lender. Such uncertainty would result in less competition, higher costs and increased market exclusion for those on lower incomes and with less favourable credit scores overall.”

The CCPC also has “concerns around the fundamental premise of the Bill, which is that the Central Bank should act as a price regulator in the market for principal dwelling house mortgage loans, rather than in its current capacity as a prudential and consumer protection supervisor”.