Updated 12.25pm 

MICHAEL NOONAN HAS warned that the country’s six main banks that they could face a penal levy if they do not make progress with cutting mortgage rates for homeowners.

The Finance Minister was speaking after holding talks with the bosses of the State’s main lenders this week. Noonan met with officials from AIB, Bank of Ireland, Ulster Bank, Permanent TSB, ACC and KBC on Tuesday and Thursday.

The government is said to be looking for an across-the-board cut in the standard variable rate (SVR) of at least 0.75 per cent.

Though he would not be specific about what rate cuts he wants, Noonan warned today that his officials will review banks’ progress over the coming weeks and will hold follow-up meetings in September ahead of the Budget the following month.

“The issue of a penal banking levy in the Budget or powers for the Central Banks to regulate interest rates will be considered at that time if sufficient progress is not made,” he warned.

Noonan said he had secured agreement from all lenders to review their standard variable mortgage rates and presents options and products to help reduce the burden on homeowners by the beginning of July.

“I outlined my view, that Standard Variable Rates being charged in the Irish market are too high. There was agreement from all lenders that customers should have access to more competitive mortgage products as per my recommendation,” Noonan said today.

The current average SVR in Ireland is around 4.2 per cent. This is almost twice as high as the European average. The banks have faced increasing political pressure in recent months to reduce their rates.

Speaking at a press conference today, Noonan said he reminded the bankers that a bill from independent senator Feargal Quinn, which would give the Central Bank powers to fix interest rates, was published this week.

“I also pointed out to them that the government doesn’t have a majority in the Senate so that, you know, there’s pressure coming on the political side and that I expected them to make movement,” he said.

Earlier this month, AIB announced a cut in its rates which will come into effect in June. Noonan said he wanted banks to offer “a range of products” and not all offer the same rate cuts.

In a statement, he said: “The banks agreed to review their rates and products and, by the beginning of July, to have simple options to reduce monthly mortgage payments for SVR customers.

“Some of the potential products include lower standard variable rates for existing and new customers, competitive fixed rate products and lower variable rates taking account of loan to value for new and existing customers.”

Noonan said that he also outlined to the lenders the need for greater competition in the mortgage market and better promotion of new products if customers wish to avail of better rates.

The position of homeowners in negative equity was also discussed with the lenders.

“Assurances were sought and received that these homeowners will be able to avail of options to reduce their monthly repayments,” the minister added.

Earlier this month the government announced a new suite measures aimed at helping struggling mortgage-holders. However, there was criticism that the proposal would not have the banks “quaking in their boots”.

Read more: Big plan to help mortgage holders ‘won’t have the banks quaking in their boots’