More than 300,000 mortgage holders are being “exploited and ripped off under the watch of the Government and the Central Bank”, Fianna Fáil has claimed. Finance spokesman Michael McGrath said the banks were “gouging” Irish mortgage holders who paid more than 4 per cent in interest compared to a 2.3 per cent average in the rest of the euro zone.

During a Dáil Private Member’s debate on residential mortgage interest rates, Mr McGrath said rates of 4.5 per cent were “well in excess” of the banks’ cost of funds, according to the banks’ data, so their claims on rates were “bogus”.

Mr McGrath said the European Central Bank interest rate was at its lowest ever but a customer with a €200,000 mortgage and 20 years remaining was paying 4.5 per cent interest rate.

That was “€992 a year more than someone who can avail of offers available to new mortgage customers and €3,874 a year more than families with a tracker rate. He added: “These are huge sums of money to any family and rightly demand our attention in this House.”

Minister of State Simon Harris said the Central Bank governor had said the rates charged in Ireland were higher in the euro area were because "the cost of funds for banks operating in Ireland is higher than elsewhere in the euro zone" and because of "lack of competition". He said the Government "continues to work to create an environment conducive to the entry of new entrants primarily through the implementation of policies to promote economic recovery".

The Government had taken steps to make sure the Irish financial market was accessible to any financial institution considering establishing in Ireland, he added, and it was working with national and European competition authorities to “encourage and support new mortgage lenders into the market”.

Mr Harris said the Government had called for active monitoring of the standard variable mortgage rate market by the Central Bank and the Competition and Consumer Protection Commission.

Fianna Fáil public expenditure and reform spokesman Seán Fleming said the same banks with the same access to funds were charging 2 per cent more in the State than they were in Northern Ireland.

The Fianna Fáil motion calls on the Coalition to engage directly with State-owned banks and make it clear the current situation could not continue.