Thursday 27 July 2017

Huge surge in homeowners being paid mortgage aid

17,000-plus families receiving interest supplement from State

Charlie Weston Personal Finance Editor

THE number of homeowners getting emergency aid from the Government to pay their mortgages has doubled in the past two years, new figures obtained by the Irish Independent show.

A total of 17,433 families are now getting mortgage interest supplement from the State, up from just 8,000 at the end of 2008. The payment covers only the interest portion of a mortgage, with average payments of €316 a month.

It is a short-term payment provided to help mortgage holders who lose their jobs or are hit by a significant loss of income. It is designed to ensure that family homes do not end up being repossessed because people can't meet mortgage repayments. Seven out of 10 of those claiming the supplement are unemployed.

To get it, you must demonstrate that you were able to afford the mortgage when you took it out, and you will have to be means-tested.

Those seeking the payment are assessed by community welfare officers, who are part of the HSE, but the funds are provided by the Department of Social Protection. Earlier this week, the Financial Regulator revealed that almost 35,500 people have not been able to make repayments on their mortgages for three months or more. Almost 25,000 of these have not paid their mortgage for six months.

A number of people who are in arrears may be getting mortgage interest supplement, but there are no figures on how many. In July, the Government said it was to conduct a major revamp of how mortgage interest supplement operates.

Struggling

This follows persistent criticism that the payment is too difficult to qualify for. Claims have been made that up to 1,000 people a month are turned down for the support, with enquiries from struggling homeowners often not even recorded by community welfare officers.

Research carried out by the Department of Social Protection, and published in July, showed that one in five struggling homeowners getting the state help took out a mortgage that was between six and eight times larger than their salary.

And 20pc of those who are receiving mortgage interest supplement borrowed between €260,000 and €360,000, the review of the mortgage supplement scheme by the Department of Social Protection showed. An analysis of 100 households claiming the support found 17.8pc of them took out a mortgage that represented between six and eight times their salary.

This means that someone who was earning €38,000 was allowed to borrow up to €300,000, and someone who was earning €80,000 during the boom would have been able to borrow €640,000.

The revamp of the mortgage supplement will mean subprime lenders -- who charge interest rates of up to 8pc on mortgages -- will be forced to cut the interest they charge homeowners receiving the state support in future.

Higher mortgage interest rates are charged by subprime lenders than mainstream lenders because people who take out these mortgages pose a greater risk that they will not repay.

But state payments are risk-free so subprime lenders will have to reduce the interest rates they charge to someone getting mortgage interest supplement. Most people who have a subprime mortgage generally do not qualify for the mortgage interest supplement.

Irish Independent

Promoted articles

Also in Business