Banks finally give deals to ease mortgage pain
BANKS are finally starting to make long-term offers to mortgage-holders who are unable to meet their repayments.
Under intense pressure from the Central Bank, Permanent TSB – the biggest lender during the boom – is offering to reduce monthly repayments on the mortgages of up to 1,500 homeowners who are struggling financially.
So far, 1,000 homeowners have accepted the offer.
And Ulster Bank has said it had already hit its target imposed by the Central Bank to have offered long-term deals to 20pc of those in distress.
Six banks had until yesterday to report to the Regulator on their progress in offering sustainable solutions to those in mortgage trouble.
The Central Bank has threatened to impose financial penalties on the six banks if they do not meet the targets.
Now evidence has started to emerge of banks beginning to tackle the crisis that has seen almost 100,000 homeowners get behind on their repayments.
Up to now, struggling homeowners have mainly been offered short-term fixes, such as being allowed to pay interest only for a couple of months.
There has been no serious attempt to offer longer-term deals.
Banks have been holding back from tackling the chronic mortgage crisis over fears they will encourage people who can afford to meet their payments to "try it on" and seek a deal.
They also fear they will run out of capital and that many of the deals offered to those in deep financial distress will involve writing off debt.
Finance Minister Michael Noonan has confirmed that the state-rescued Permanent TSB has offered to split the mortgages of hundreds of homeowners in trouble.
Other lenders have begun to offer split mortgages to those who can't meet their monthly payments. It is an option favoured by the Central Bank for solving the mortgage mess.
A split mortgage is where the borrower pays capital and interest on part of the loan, with the rest put to one side.
In most cases, no repayments are made on the part of the mortgage that is put to one side.
Permanent TSB had been charging interest of 1pc on the portion that is "warehoused" but has since changed its policy and no longer charges interest on the part of the mortgage that has been frozen.
A split mortgage that is designed like this can dramatically reduce monthly repayments.
If someone with a split mortgage still owes money on the warehoused part at the end of the term of the loan, some banks may be willing to write off this amount if the consumers' circumstances have not improved.
Mr Noonan confirmed that around 1,000 of the Permanent TSB customers who were offered a split mortgage had accepted the deal. If they stick to the newly agreed repayments for six months, the bank will confirm the agreement.
The move by Permanent TSB is part of a plan to meet strict targets, imposed by the Central Bank, for dealing with mortgage-holders in arrears.
Six of the leading domestic banks have to offer one-fifth of their customers who are in arrears a "sustainable" long-term solution to resolve their mortgage difficulties.
AIB, Bank of Ireland, Permanent TSB, KBC Bank, ACC and Ulster Bank were due to have offered 20pc of those in arrears a long-term repayment plan by the end of last month.
Ulster Bank said earlier this month it had reached its target.
However, there are indications that other banks are struggling to meet their targets.
A number of banks contacted yesterday, including Permanent TSB, would not say if they had met the demands.
Director of the Irish Mortgage Holders Association David Hall said the banks would miss the targets.
"There seems to be a big problem and it is very concerning. There is a deafening silence from the banks."
A spokesman for the Central Bank said banks had 22 days from the end of June to report to regulators on whether or not they had met the mortgage-arrears resolution targets.
This meant banks were in the process of reporting to the Central Bank on the arrears issue.