Yes, I think a single overall interest rate cap for residential mortgages would work.
We already have caps in place in respect of the interest rates that money lenders and credit unions can charge so the principle is already accepted in Irish law. It always struck me as a bit of an anomaly that banks can (in theory) charge whatever interest rate they want.
In terms of the methodology, my preference is that the cap would be set at an agreed % (I have suggested 125%) of the new lending rate returned to the ECB by the Central Bank in respect of variable rate mortgages. This figure is transparent and is calculated in accordance with detailed rules on a harmonised EZ-wide basis. Currently, it would exclude trackers (other than restructured trackers - much to Brendan's annoyance) but I can certainly see tracker-type products re-emerging in the future in the Irish market (probably set at a pre-determined margin over LIBOR or a bank's cost of funds), so this may not always be the case.
Alternatively, we could simply follow the French model. The problem I see with this methodology is that you would have to create a detailed rulebook as to how the average effective rate is calculated and there is no third party available (other than the Central Bank itself) to adjudicate on the proper interpretation of that rulebook. In other words, it all seems a bit of a black box to me. You would also have to set a % rate that reflects the current, large tracker book which may not be appropriate in the future.
I am conscious that I am largely ignoring fixed rate mortgages in this but I don't really see a problem including these in the reference pool of mortgages against which a cap would be calculated.
To be honest, I am not particularly hung up on the methodology or % cap. There doesn't seem to be any enthusiasm for such a consumer protection measure so the precise details as to how it would work is largely academic. Most commentators seem to concentrate on how unfair things are without making any concrete suggestions to change anything in particular.
Oh well, at least I'm amusing myself!