Banks may face sanctions for refusing to cut rates

Sanctions for banks that consistently refuse to slash variable interest rates for mortgage customers are being considered ahead of Budget 2016.

The Coalition has been discussing whether to hike the current bank levy as a means to punishing lenders who fail to comply with requests to lower the rate of interest.

However, some ministers are now stressing the fact that banks are putting forward a number of “options” for variable rate customers as a means of reducing monthly payments.

Finance Minister Michael Noonan said last week that it is up to borrowers to change mortgage provider if they are not satisfied with the options being offered.

He said that he believes increased competition in the market in the future will provide the best incentive for banks to slash variable rates.

Nonetheless, Tanaiste Joan Burton said earlier this week an increase in the levy remains “under examination” ahead of the Budget on October 13.

“I certainly think that when you look at the variable interest rates and you compare them to the rates at which banks are borrowing at, there’s an enormous margin there.

“I certainly think it’s possible to give people who are on variable rate mortgages, in a number of cases, a much better deal,” Ms Burton said.

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