| -1.2°C Dublin

How it works

HALF a dozen lenders are seeking to offer negative-equity mortgages. These will allow people to move house even though their existing property is worth less than they borrowed.

Mortgages such as these will be limited to those with good earnings prospects, and who are not too deeply in negative equity.

The Central Bank has still to approve AIB, EBS, KBC Bank and Ulster Bank to offer these products. Bank of Ireland and Permanent TSB have been cleared.

One finance expert explained that the scheme might help a family that originally borrowed €300,000 during the housing boom years.

The housing bubble was at its worst between 2004 and 2008.

Our couple managed to pay off €90,000 on the original mortgage. They have done this through a combination of meeting the monthly repayments and by using a small inheritance.

But the severe collapse in property prices means their house may now only be worth €150,000 and they still owe the bank €210,000.

This means the household would be €60,000 in negative equity. In other words, if they sell today they will still owe the bank more money than they can realise from the sale.

If this family needed to move to a larger home because there were now more children, they may be able to buy a new house for €240,000. They would take the €60,000 amount on to the new mortgage.

Their overall mortgage borrowing would be €300,000.

This would mean they would owe 25pc more than their new home was worth.

Irish Independent