Tuesday 23 January 2018

Banks shun relief scheme for struggling homeowners

Charlie Weston Personal Finance Editor

Just three banks are offering struggling homeowners a government-backed scheme to help slash their mortgage repayments by up to 50pc.

The so-called 'deferred interest rate scheme' was a central recommendation of the final report of the Expert Group on Mortgage Arrears last November.

It has been trumpeted by the Government as a key measure in helping under-pressure mortgage holders.

But an Irish Independent probe has revealed that almost a year after it was recommended, most lenders have either decided not to introduce it or are still working on implementing it.

Only Permanent TSB, EBS and Bank of Ireland claim to offer the option of deferring some of the interest on a troubled mortgage for up to five years. But these lenders would not say how many mortgage holders, if any, had taken up the scheme.

Lenders Ulster Bank, National Irish Bank, KBC Bank and Bank of Scotland/Halifax have decided not to offer the scheme to distressed mortgage holders.

AIB has yet to offer the deferred interest option, while subprime lender Start Mortgages hopes to offer it by the end of the year. Irish Nationwide is still working on implementing it.

Designed to help those whose income has been destroyed from losing their homes, the deferred interest scheme allows borrowers to pay just two-thirds of the interest due on their mortgage for up to five years.

The distressed borrower does not have to pay any of the capital for up to five years. The remaining one-third of the interest they put off paying will still be owed in five years. But the lender will not be able to charge any additional interest on the deferred interest amount.

A family with a €100,000 mortgage over 30 years, with an interest rate of 4.5pc, could see monthly repayments halved by availing of the scheme.

Paying full capital and interest would mean monthly repayments of €507. If the family was to opt to pay the interest only then the monthly cost would be €375.

But opting to defer two-thirds of the interest would take monthly repayments down to just €247 -- half the monthly amount if capital and interest was being paid.


The Expert Group on Mortgage Arrears and Personal Debt, which was chaired by accountant Hugh Cooney and reported last November, had advocated that lenders offer the deferred interest scheme.

But as it is a voluntary scheme, the State has been unable to persuade some lenders, particularly foreign-owned banks, to offer it.

Michael Dowling, of the Independent Mortgage Advisers' Federation, said the experience of brokers was that most lenders were not offering the deferred interest option.

"It is generally not available," Mr Dowling said. "The banks' mortgage processing systems were unable to cope with it. And it is not mentioned in any of the booklets issued by the lenders on the options for restructuring your mortgage."

Irish Independent

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