Struggling mortgage holders to get €70m bailout
Published 22/04/2010 | 05:00
STRUGGLING homeowners will be given a €70m bailout this year as the numbers claiming mortgage support skyrockets, the Irish Independent has learned.
The revelation comes as new figures from the State's economic think-tank reveals 70,000 more homeowners will be dragged into negative equity this year.
There are now fears the Government's emergency relief scheme for home loans is unsustainable as new figures reveal a tenfold increase in its cost since 2005. Last year, the cost doubled to €60m as 15,000 families struggled with job losses and pay cuts as the values of their homes plummeted.
It is estimated that the bill for this year will be between €63m and €70m. It was €6.3m in 2005. The situation is set to deteriorate further as interest rates rise, and an eligibility review this year will open the scheme to even more desperate applicants.
The figures also reveal specific black-spots where hundreds of families are struggling to pay their home loans. These include Limerick, which has been devastated by the loss of Dell and other high profile employers, and in Taoiseach Brian Cowen's home constituency of Offaly.
The assistance helps pay off the interest on the loan -- which means it ultimately goes to the banks, already in receipt of the biggest bailout in history.
The Department of Social Protection admitted the costs of servicing the scheme are expected to rise to €63.9m this year.
And the number of mortgage-holders in serious financial difficulties may be much higher as there are no definitive figures for those who have been turned down for the scheme.
Housing charity Respond estimates as many as 1,000 may be refused each month. The scheme was originally intended as short-term aid for those unable to meet repayments due to job loss. "We are hearing figures of 1,000 people being refused on a monthly basis," spokeswoman Aoife Walsh told the Irish Independent.
Finance experts last night warned that the emergency-relief scheme was doing little to ease the ticking timebomb of the "legacy debts" that remain.
"They bought in at the height of the market, they believed they would always earn more each year ... something needs to be done there. Some people will never have the capacity to pay back those debts, particularly if they buy into this concept of lower wages," Irish Mortgage Corporation director Frank Conway said. The department last night confirmed a review of the administration of the scheme was due to be "completed over the coming weeks".
Where a married couple had taken out the mortgage both must be unemployed or work less than 29 hours a week to be eligible for the scheme.
In Limerick, there has been a 55-fold increase since 2005 in the number of people granted the short-term support. Offaly saw an 11-fold increase to 145 at the end of 2009.
Economic and Social Research Institute economist David Duffy predicted the continuing collapse in house prices would put 70,000 homeowners into negative equity this year.