Extending mortgage payment breaks is not good for borrowers

Brendan Burgess

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Here is the text of a press statement I issued this morning

Extending mortgage payment breaks is not good for borrowers

A three month or 6 month payment break was an appropriate emergency measure but it should not be extended
  • It’s easy enough to reschedule a loan after a payment break of 6 months
  • But the longer the term, the harder it is to reschedule
  • While the borrower is paying nothing, interest continues to mount, so the amount owed by the borrower increases.
Longer payment breaks are not good for customers
  • The longer the break the higher the mortgage balance making it difficult to recover from
  • Some borrowers find it difficult to break the habit of not paying
Alternatives to be considered
  • Switch the mortgage to interest only so, at least the amount owed stops increasing
  • Use the Central Bank’s Mortgage Arrears Resolution Process to find a more appropriate medium or long term solution
The Government would be better off
  • Paying a mortgage assistance payment to those in long term difficulty
    • We help people with their rent if they can’t afford it
    • We provide social housing to people who can’t afford it
    • Why is there no help for people who buy their own homes and struggle with their mortgage?
  • Putting relentless pressure on the lenders to reduce mortgage rates for allborrowers
    • The average mortgage holder who does not have a tracker is paying €300 a month more than they would be in another eurozone country
Payment breaks for a minority penalises the majority of mortgage holders
  • We pay the highest mortgage rates in the eurozone because those who are paying their mortgage are also paying the mortgages of those who won’t pay and whose homes the lenders can’t repossess


Making it more difficult for lenders to collect repayments will harm first time buyers
  • If banks are forced to give payment breaks, they will be less likely to lend to potential borrowers and/or will charge higher rates
 
I can never understand why something isn't done to lower the rate that people are paying for their mortgages here!! It baffles me. Everywhere in the Eurozone pay less. Why haven't the government done something about this?? It really angers me when I think about it.
 

You've actually changed my mind on this Brendan. Mortgage interest supplement on a time-limited basis in clear circumstances of financial distress makes sense.

Especially if bundled together as part of a policy to make re-possession easer in hopeless cases.

Banks shouldn't be given the job of making social welfare policy.
 
For people on tracker mortgages, a payment break is effectively free money.

For a borrower on a 1% tracker, and many are on lower rates, the cost of interest is €83 per month on each €100,000.

In round terms a years break would require an extra months payment at the end.
 
I heard a snippet on the radio that the government has announced that the banks will not be extending it beyond the end of the month.

They have encouraged the banks to treat customers fairly and flexibly on a one to one basis.

Brendan
 
The difference with the current situation is one of public health. The public health emergency is not over, indeed, there is every chance it will be escalated over the coming months.
If the virus is to be controlled, then people must obey the public health guidelines. It means they are mandated, by law, not to engage in commercial business which will endanger public health. If they cannot pay their mortgage because their income has been restricted by a public health emergency then, it stands to reason, that they should not be punished for this.
Pearse Doherty was quite right to point out that engaging in an arrangement with a bank to restructure the mortgage is , effectively, treated as a default.
This creates a credit issue for the defaulter and is not fair in a public health crisis.
 

Most Eurozone countries have more streamlined repossession processes. Here, not so much.
 

Nobody wants the business outside of Ireland, so more legislations will only discourage the Irish banks from continuing in the market as would you be happy with fewer mortgages being available?
 
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