Minister for Finance Michael Noonan has insisted that he will not interfere with what any bank decides to charge in interest rates.
With ECB rates at an historic low of 0.5%, most banks have put their variable rates up to combat the loss they are making on tracker mortgages.
This has resulted in those on variable rate mortgages paying hundreds more in monthly repayments than people on tracker mortgages of the same value.
With the State having a major shareholding in a number of Irish banks following the bail-out, there have been calls on the government to force banks to pass on rate cuts to all customers.
However, Minister Noonan said yesterday he would not be getting involved, saying banks must be allowed to operate independently in order to make a profit for the taxpayer.
Minister Noonan said the Central Bank had been asked if it wanted the power to manage the interest rates of retail banks, and had insisted it didn’t want such powers – as keeping interest rates artificially low might encourage banks only to lend to the ‘safest’ corporate clients.
“We want the banks to be profitable again, to protect the investment that the Irish taxpayer has put in,” Noonan insisted, saying profitable banks could ultimately be sold off so that the taxpayer could recoup its massive investment in them.
While this meant some mortgage holders would be faced with higher interest rates, the Minister said he was “mindful of the costs to the general taxpayer, who owns most of the banks”.