MORTGAGE ARREARS

Banks face foregoing millions of euro in mortgage repayment income as a result of radical recommendations from a Department of Finance expert committee that would allow struggling debtors delay payment on up to 33% of their home loans for several years, The Sunday Independent reports.

The Expert Group on Mortgage Arrears and Personal Debt in a report due out later this month is recommending the changes and these will likely be forced on state-controlled mortgage lenders, the newspaper states.

“Part of the mortgage-interest payments would be suspended for a period of time,” an informed source said. “Say you have a €300,000 mortgage and can’t fully make payments on it, but you can make payments on €200,000. You could park €100,000 and then continue to service the €200,000 portion.

“That portion could be recovered through the eventual sale of the house or when the homeowner’s circumstances changed.”

However, this would be an option of last resort and would not amount to a blanket scheme that all mortgage holders could avail of.

“A mortgagee would have to be able to service some of the debt. It would apply only after other forbearance measures, like a period of interest-only payments or a mortgage holiday had been exhausted,” the source said.

Meanwhile, The Sunday Business Post reports subprime lenders are offering deals to customers in arrears that will see them still paying off their loans when they are 75.

Two lenders, Springboard Mortgages and Start, have both extended the length of their mortgage terms in an effort to bring down monthly repayments for struggling customers. Subprime lenders typically charge between 5% and up to 10% more for loans to customers, the bulk of whom would have been unable to access mortgages from mainstream lenders.

The subprime lenders’ policy is in stark contrast to most mainstream lenders, who have refused to extend the term of their mortgage loans beyond retirement age.