President Michael D. Higgins signs Prime Minister Enda Kenny's Seal of Government to office of Taoiseach in Dublin, Ireland May 6, 2016. REUTERS/Clodagh Kilcoyne(reuters_tickers)
DUBLIN (Reuters) - Ireland's main opposition party said on Monday it would table a law to give the Central Bank power to intervene in the setting of mortgage rates, in one of the first legislative tests of the new minority government.
Prime Minister Enda Kenny's coalition last year used its majority to vote down a similar proposal. But his new minority government, formed on Friday, controls just 59 of parliament's 157 seats, leaving opposition parties with enough votes needed to pass legislation if they act together.
Fianna Fail, Ireland's second largest party, has agreed to abstain on key votes on government appointments and budgetary issues to the end of 2018, but the agreement does not prevent it from proposing its own legislation.
The party's finance spokesman, Michael McGrath, said it would take advantage of this "new reality" to give the Central Bank powers to intervene if the market fails to provide home loans at a reasonable rate.
The bill will be proposed within the next two weeks.
"Additional powers are needed to ensure that customers are not being fleeced, because that is what is happening," McGrath told state broadcaster RTE, noting that some bank rates were over 4 percent, double those in some other euro zone countries.
The Central Bank has indicated it does not want the powers, and Governor Philip Lane last month described a cap on mortgage rates as a "very crude instrument".
But McGrath said the central bank was obliged to operate within whatever legislative framework parliament decides.
Most banks reduced variable rates after Finance Minister Michael Noonan last May threatened that the authorities could take control of setting mortgage rates.
Allied Irish Banks, the country's second largest lender, on Monday said it was reducing rates by 0.25 percent, its fourth cut in 18 months.
Noonan said in a statement that the AIB move was "illustrative of the increasingly competitive mortgage market we now have in Ireland."
(Reporting by Conor Humphries; Editing by Robin Pomeroy)