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Banks warned over claims of profiteering from mortgage payment break interest

Tanaiste Leo Varadkar said it is ‘unacceptable’ for banks to take advantage of the Covid-19 crisis.

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Tanaiste Leo Varadkar warned banks that it is ‘unacceptable’ for them to profit from interest charged on mortgage payment breaks (Damien Eagers/PA)

Tanaiste Leo Varadkar warned banks that it is ‘unacceptable’ for them to profit from interest charged on mortgage payment breaks (Damien Eagers/PA)

Tanaiste Leo Varadkar warned banks that it is ‘unacceptable’ for them to profit from interest charged on mortgage payment breaks (Damien Eagers/PA)

The Government will come down on banks “like a ton of bricks” if they profit from interest charged on mortgage payment breaks, Leo Varadkar has said.

The Tanaiste said it is “unacceptable” for banks to take advantage of the Covid-19 crisis.

He made the comments after Sinn Fein TD Pearse Doherty claimed that customers making use of payment breaks are being charged thousands of euro in interest.

Since March, nearly 80,000 mortgage-holders affected by the pandemic have taken payment breaks which could see several thousand euro in additional interest charged over the lifetime of the loans.

Mr Doherty, the party’s finance spokesman, also said that retail banks and the Banking and Payments Federation of Ireland (BPFI) “misled” senior ministers during a meeting held in May this year.

He told the Dail that minutes reveal that a number of the banks’ chief executives claimed that charging interest is required by the financial regulator.

However, the Central Bank of Ireland earlier this week said there is no such requirement.

Mr Varadkar said the banks “never claimed” they could not waive interest for that period.

“They did say that it will be possible for them to waive interest for that period,” he said. “The issue that they had was that somebody had to cover the cost of the payment break.

“The question is, who covers that cost? It doesn’t come out of the bank’s profits – ideally I think it should, but they have no profits this year and may not for a number of years because of what’s happening to our economy.

I was very, very blunt with the banks and very clear with them, and I sought an assurance from them that, as a consequence of them extending these mortgages and then extending these loans, they should only be covering their own costsTanaiste Leo Varadkar

“Should taxpayers cover that cost? I don’t think so. I don’t think that would be fair on taxpayers.

“Should that fall on mortgage-holders who are up to date with their payments? I don’t think so.

“So it has to fall somewhere, and that additional cost at the moment at least, is falling on the customers who are availing of that payment break.

“But I was very, very blunt with the banks and very clear with them, and I sought an assurance from them that, as a consequence of them extending these mortgages and then extending these loans, they should only be covering their own costs.

“I said to them very clearly that, if it turns out that you somehow make an additional profit out of this, or an additional premium out of this, that you somehow make more money out of this than you would have if the loan was paid back in time, that I would see that as serious.

“We would come down on them like a ton of bricks. That is the fundamental thing that I need to find out over the next couple of weeks.”

Mr Doherty said: “There is no country in Europe that is faced with such high penalties as a result of this payment break than Ireland because of the high level of interest rate.

“You should do what the Spanish government did on the 13th of March, which is that they brought in legislation, legislation which I have given to your Minister for Finance, that would prevent the banks profiteering on the back of a pandemic where the economy was shut down, and people unfortunately are unable to pay their mortgages at this time.”

PA