Plan to help householders get home loans out of clutches of vulture funds after mortgage rates surge

The Irish Independenthas learned the Government will resist pressure to intervene to help households this summer with a pre-Budget cost of living package ruled out.

However, the Budget in the autumn is likely to introduce measures to help those whose monthly repayments have increased by hundreds of euro in the last year.

Ideas being floated include enabling people to switch their loans from a vulture fund to state-backed initiatives such as the Local Authority or Rebuilding Ireland home loans scheme, and a government information campaign on switching mortgages.

Finance Minister Michael McGrath also wants banks to make it easier for borrowers whose loans were moved to a vulture fund to switch back to them and wants the so-called pillar banks to buy performing mortgages that have been sold by lenders to vulture funds.

He has also told the Central Bank to find out why vulture funds are in some instances charging excessive interest rates and wants it to develop a code of conduct on mortgage switching to encourage more households to switch lenders.

A direct intervention of “across the board” mortgage interest tax reliefs for those on fixed, variable and tracker mortgages is not being ruled out. But senior coalition figures are cool on the idea because it would be an indirect subsidy to banks, could be inflationary and would also pose a high cost to the Exchequer.

Another option being canvassed within Government is a possible time-limited tax credit for home loan customers that would be similar to the €500 rental credit.

But senior figures in Fine Gael and Fianna Fáil argue that indirect interventions such as income tax cuts and another round of €200 energy credits could be the most effective way of helping households.

It comes as AIB chief executive Colin Hunt warned borrowers to expect further new interest rate hikes after the ECB pushed up its main lending rates by 0.25 percentage points yesterday.

Fianna Fáil sources said Mr McGrath was open to the idea of switching loans from a vulture fund to state-backed initiatives. This was proposed by Cork North-West TD Pádraig O’Sullivan and backed by colleagues including Fianna Fáil’s Seanad leader Lisa Chambers who said it was “a really practical solution”. She said the Government “needs to put money into helping people to switch”.​

Fianna Fáil senator Malcolm Byrne proposed giving the Central Bank a statutory function to promote competition.

It comes as the ECB confirmed an increase in rates to 3.25pc and signalled further increases could be on the way.

“We are continuing this hiking process,” ECB president Christine Lagarde said. “This is a journey.”

Leo Varadkar said reliefs would be considered but he couldn’t make a promise they would be in the Budget.

“It is something we will consider but I do need to be frank with people – the tax package can only be so big. We want to do something obviously to help workers who are paying an awful lot of income tax, particularly middle income people,” he said. “We want to make sure that we honour that Programme of Government commitment to reduce income tax and to index bands and credits.”​

In the Dáil, Micheál Martin dismissed a Sinn Féin demand for mortgage interest relief to be introduced now.

“You need to look at this more broadly,” Micheál Martin told Pearse Doherty, Sinn Féin spokesman on Finance.

“Even your proposal is discriminatory against those on fixed mortgage rates. People with the same loans, same repayments and the average repayment across fixed tracker and variable is roughly the same. But you’re proposing to exclude nearly 50pc from your specific proposals, to discriminate against those.”

Mr Doherty replied: “You are still not saying that you’re willing to intervene on behalf of mortgage holders.” He said Fianna Fáil had championed mortgage interest relief in the past, when rates were far lower.