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Bank now offering negative-equity homeloans for 175pc of house value

BANK of Ireland is to offer customers in negative equity new home loans that are almost double the value of their house.

Up to now the bank was restricting negative-equity mortgages to those who were only taking on small amounts of their first mortgage on to a new mortgage when moving house.

Now, homeowners who qualify for the mortgages could end up with borrowings of up to 175pc of what their new home is worth.

This would mean that someone who buys a €100,000 house could end up owing €175,000 on the negative-equity mortgage on their new home.

Head of mortgages at Bank of Ireland Jonathan Byrne last night denied the bank was acting irresponsibly.

Customers will undergo a full assessment by the bank and must demonstrate that they can afford the new mortgage, he said.

The bank, and its subsidiary ICS, has got the approval of regulators for the new 175pc ceiling.

Up to now, people in negative equity who wished to move house, were being offered new mortgages worth no more than 125pc of the value of the new property.

The mortgages will be offered in two forms -- one for those in negative equity who wish to move to a property of a higher value, and one for those who wish to dispose of their current home and trade down to a house of lower value.

These products will allow people who are stuck in apartments and homes the option of moving to a new property and taking the negative-equity portion of the first mortgage onto a new mortgage for the new home.

In many cases the overall amount of money that will be owed by those who take up the negative-equity mortgage will go down, even if they end up deeper in negative equity, Mr Byrne said.

More than half the value of the bank's residential mortgages are in negative equity.

Mr Byrne would not say what lending criteria the bank would apply when approving the new loans.

Trade-up negative equity loans will enable customers who are in negative equity to sell their current home and move to a higher-value property, carrying over an amount of negative equity to the new mortgage.

The trade-down version will allow customers who are in negative equity to sell their current home and move to a lower-value property, while carrying an amount of negative equity to the new mortgage.

Mr Byrne said the products were not aimed at all of those in negative equity, but that customer feedback had indicated that there were customers of the bank who needed to move because of a new job, or because of a growing family.

He pointed out that it is not going to be the only solution available to customers, and that this would not allow for any debt relief.

Those trading up would lose their good-value tracker mortgages, but those trading down could keep their trackers if they are in arrears and co-operating with the bank.

Irish Independent