Monday 24 September 2018

AIB crackdown on strategic defaulters

'There is no rent-free option any more,' warns bank boss Duffy

David Duffy, boss of AIB, at its headquarters in Ballsbridge, Dublin
David Duffy, boss of AIB, at its headquarters in Ballsbridge, Dublin

Donal O'Donovan and Charlie Weston

THOUSANDS of people in arrears on their AIB mortgages are opting not to pay in the hope of getting debt relief, AIB has claimed.

Bank boss David Duffy said he was getting tough on mortgage holders who refused to pay. "There is no rent-free option any more," he said.

But the claim that one in five of the bank's customers who are in arrears are strategically defaulting has been criticised as lacking any scientific backing.

Around 20pc of mortgage arrears cases are situations where people are not paying a mortgage when there is enough income to meet monthly repayments, Mr Duffy said.

Most of these were buy-to-let mortgage holders, with smaller numbers of homeowners missing payments.

Thousands of AIB customers are more than three years behind on their repayments, the bank boss said.

He said "a few thousand" legal letters have already been issued to AIB mortgage holders who are refusing to make repayments or engage with the bank.


"It's not discretionary to stay in your home and not pay your mortgage" when it can be afforded, Mr Duffy said.

The bank had noticed an increase in strategic default, but this tapered off once people realised the personal insolvency process would be tough.

Some people were paying credit card, credit union and car finance debts ahead of the home loan.

AIB has agreed to restructure 4,000 unsustainable mortgages with easier terms, including some debt write-offs, Mr Duffy said. It has made 12,500 of these offers, he said.

Strategic defaulting was "normal human behaviour" when there was no credible risk of losing your house, AIB's boss admitted.

The fact that some households thought to have been in financial trouble have the ability to repay debt once the numbers are looked at is one reason why resolution is happening faster than expected, he said.

But David Hall of the Irish Mortgage Holders Organisation claimed the bank was spinning to justify moves to repossess properties.

He asked: "If 20pc are allegedly strategically defaulting, why has AIB not sorted out the other 80pc?"

Professor of Finance at Trinity College Dublin Brian Lucey said nobody knows the true extent of strategic defaulting.

He offered to survey the 140,000 homeowners in arrears and the 30,000 investors who are behind on payments on behalf of the bank to independently research the extent of the problem.

Prof Lucey would work for free and could have results within two months, he said.

And Ross Maguire of the New Beginning support group said most people in arrears were insolvent and were not able to meet their bills as they fall due.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business