Banks offer mortgage interest cut to owners who give up their homes
Published 11/12/2012 | 05:00
BANKS are offering desperate homeowners who hand back the keys of their house a reprieve on their interest rate – but will continue to pursue them for the debt.
Borrowers who hand back the keys of their home to AIB and EBS will be able to pay back any shortfall they still owe at the interest rate of their mortgage.
This means that those who give up ownership of their home will pay the shortfall, after sale, at rates as low as 2pc – instead of personal loan rates of up to 14pc.
A spokeswoman for AIB and its subsidiary EBS, said: "The residual balance will be repaid over an agreed period subject to existing terms and conditions."
The move means that owners will get a better deal on the repayment of any shortfall they still owe, if their home is sold but does not fetch the same amount that they borrowed to buy it.
Other banks insist that people who sell a home that they can no longer afford must still pay back whatever is still owed at the usual personal loan rate.
AIB and EBS will allow those who owe money, even after giving back the keys, to repay it at a low mortgage interest rate.
Meanwhile, AIB has said it will step up the pace of mortgage write-offs in 2013.
The bank is preparing to offer customers who are working with the bank the chance to have some of their debt cancelled.
The head of AIB's new arrears unit, Garry Stran, said it would begin tackling problem loans "in a more industrialised fashion than seen before".
Mr Stran explained that around a third of borrowers who have had their mortgages restructured, and who are working with the bank, could have some of their debts written off.
"Writing off debt where people are doing the very best they can is absolutely appropriate," he said, though he ruled out wholesale forgiveness.
Any loan restructuring would be based on a borrower's ability to pay while letting them keep to a reasonable living standard.
Mr Stran said that "given the scale of the problem" there was no need for "emotive conversations" about TV subscriptions, gym memberships and cigarette habits
Minister for Justice Alan Shatter welcomed the bank's offer of mortgage restructuring and the possibility of some debt forgiveness to customers who work with it, saying he hoped other institutions would take a similar approach.
It is estimated that around 80,000 home borrowers have been assisted in recent years by such debt forbearance arrangements agreed with financial institutions.