Banks tell thousands in trouble: cut health cover
Published 18/02/2012 | 05:00
BANKS are telling thousands of families struggling to restructure mortgages they will have to cut back on health insurance, private education, groceries and Sky Sports before any deal can be done.
Around 1,300 families a month are now getting their mortgage payments reduced -- with the Government admitting last night that more were likely following yesterday's revelation that one in seven homeloans is in trouble.
The banks have been accused of putting the boot into homeowners who are unable to meet their existing mortgage repayments.
An Irish Independent investigation can reveal how banks will only agree to change the existing conditions if homeowners:
- Shop in discount stores like Aldi or Lidl instead of local shops or supermarket chains seen as more expensive.
- Change health insurance provider or drop down to a cheaper plan.
- Cut out extra sports or movie packages from their satellite or cable television services.
- Secure a reduction in other loan repayments before coming to the bank for help.
- Take children out of private, fee-paying schools.
More than 74,000 homeowners have secured deals from their banks to reduce their monthly mortgage repayments after suffering job losses, the collapse of a business or severe pay cuts.
In such cases, banks sometimes agree to give homeowners a payments holiday or allow them to pay ‘interest only’ on their mortgages. Homeowners seeking to modify their mortgage repayments must fill out a 12-page financial statement.
This lists all household spending and income, providing the bank with bank and credit card statements going back three months, according to financial consultant Michael Dowling, who is a member of the Independent Mortgage Advisers Federation.
The form details spending on everything from phone bills, fuel and groceries, to gym memberships, salons and sports events.
Mr Dowling, who helps households secure a deal from their banks, said pressure from lenders on homeowners in south Dublin to take children out of private schools was leading to bitter arguments.
“People get very vocal when they are told to take their children out of a fee-paying school and send them to one that does not charge fees,” he said. Demands from banks that people change health insurer or drop down to a cheaper plan were also leading to huge rows, he said.
David Hall of New Beginning, a group of lawyers who represent mortgage holders in danger of having their homes repossessed, said lenders were challenging households paying for Sky Sports or UPC movie packages, telling them to change to basic TV packages. “Banks should not be telling people how to live in the absence of long-term solutions for mortgage problems,” he added.
He said New Beginning, which has 85 people a day coming to it for help with mortgage debt, was coming across large numbers of cases where people were being challenged on what they spent on groceries. “But when it comes to drink and cigarettes, they do not seem to be challenging the spending,” he added.
A spokesman for the Irish Banking Federation said banks were trying to be as fair as possible. He said that some people were willing to compromise on certain items of expenditure while others were not.
“Each situation is dealt with on a case-by-case basis. It is about working out what people can afford to pay on their mortgage and what they need to maintain a reasonable standard of living.”
The revelations came as the Government last night admitted increasing numbers of homeowners were getting into trouble with their mortgages. New figures show one in seven mortgage holders is now struggling to meet monthly repayments.
There are now 108,000 homeowners who are either in arrears or have had to go to their lender to get their repayments reduced. Of this total, some 53,000 people have not met their repayments for six months or more. These people have built up average arrears of almost €20,000 each.
A Department of Finance report on mortgages issued yesterday said the indications were that arrears would go on rising. This is despite cuts in European Central Bank interest rates at the end of last year.
The stark arrears figures issued by the Central Bank yesterday show that:
- A total of 71,000 mortgage accounts are in arrears for three months or more. This is 9.2pc of all residential mortgages.
- Some 1,300 mortgages a month are being restructured by banks. Half of those who get a deal from their lender to lower payments end up paying the interest only on the home loan.
- Overall, 74,000 mortgages have been restructured. Roughly half of these homeowners were in arrears when they were restructured or have slipped back into arrears.
- The other 36,797 mortgages have been renegotiated to make repayments more manageable.
- A total of 109 repossession orders were granted by the courts between October and December.