Fianna Fáil Finance spokesperson Michael McGrath has welcomed a new Central Bank report which looks at the causes of long term mortgage arrears. Among the findings of the report by Robert Kelly and Fergal McCann are that the most at-risk borrowers are much more likely to have variable rate mortgages on a higher interest rate than holders of fixed-rate or tracker mortgages.
It also showed that, for those in long term arrears, the amount they have fallen behind in their repayments is increasing in over 80 per cent of cases. This indicates that there are a large cohort of mortgage borrowers who have not had an adequate payment restructuring plan put in place.
Deputy McGrath commented, “This is very timely research from the Central Bank as it highlights quite clearly that the current approach taken to dealing with serious arrears cases has not worked and is never going to work. It is no surprise to me that high variable interest rates have driven many families in to long term arrears as they typically end up with a mortgage payment several hundred euro higher each month.
“It is also striking that thousands of long terms arrears cases involve a situation where a job loss has occurred or the household has been reduced to a single income household since the loan was taken out. Long term arrears is also more common in households with 3 or more children.
“Bankruptcy is not a solution for most people in this situation as it could involve the loss of the family home. The government should be forcing the banks to put in place revised repayment terms which give a family a reasonable prospect of paying off their mortgage over an extended period of time.
“In particular, permanent interest rate reduction should be used so that the monthly repayment is brought down to a manageable level. This is not a substitute or action to deal with the wider issue of rip-off mortgage rates but can certainly help families in arrears.
“Split mortgages – where repayment of a portion of the loan is typically deferred for a number of years – have proven to be far more effective at dealing with arrears situations than simply adding the amount of arrears on to the outstanding balance. The government should force the banks to use this on a far more widespread basis and legislate accordingly if they fail to do so.”