THE Governor of the Central Bank Patrick Honohan has outlined plans for “sustainable” mortgage solutions.
He said that split mortgages could be used to keep even insolvent homeowners in their houses.
The Governor added that “imaginative design” could be used to restructure debt arrangements between banks and borrowers that could work for insolvent homeowners.
He was addressing the Institute of Bankers when he added that the concept of a split mortgage that allows borrowers to service a portion of the debt on a temporary basis could be “fleshed out.”
However, he added that this idea would not be sustainable if at the end of the mortgage the “warehoused” amount of debt was bigger than the value of the property.
Mr Honohan also conceded that it was difficult to structure split mortgages in a way that would satisfy both the borrower and the bank.
Ideally payment schedules "would link future payments to a review or to some indicator of changing ability to pay".
"For this to be considered sustainable, though, the claw-back mechanism should be sufficiently moderate that the borrower is not too much disincentivised from improving their income," he said.