Thursday 19 July 2018

Variable rates so high 'because thousands are choosing not to pay their mortgages'

Brendan Burgess wants fast-track repossession. Photo: Frank McGrath
Brendan Burgess wants fast-track repossession. Photo: Frank McGrath
Charlie Weston

Charlie Weston

Thousands of people who have been paying nothing on their mortgages for years are the reason variable rates are so high in this country, it has been claimed.

Consumer advocate Brendan Burgess told an Oireachtas committee that some 10,000 borrowers were exploiting the fact that there is effectively no sanction for not paying your mortgage.

He said those not paying were irresponsible.

Variable rates being paid by 300,000 borrowers here are the highest in the eurozone. The higher rates mean a €200,000 variable-rate mortgage here costs €3,000 more a year to service than the average in the rest of the economic bloc.

"Because there is no effective sanction in Ireland for the 10,000 or so irresponsible borrowers, the 300,000 responsible borrowers pay their mortgages for them," he told TDs and senators on the Oireachtas Finance Committee.

Mr Burgess used Central Bank figures which he claimed showed that around 10,000 mortgage holders are more than five years in arrears. He said most were choosing not to pay. This is what some commentators call "strategic defaulters".

But debtor advocate David Hall disputed the 10,000 figure, and said they it was unproven and did not stand up to scrutiny.

Mr Burgess said non-payment does not hurt the lenders, instead it hurts the other borrowers.

"The lenders use the difficulty in repossessing houses as an excuse for charging more. When overseas lenders look at the Irish market and see that it takes years to repossess a home from a defaulter, they stay well away," he said.

There should be a fast-track repossession system for those who had not paid their mortgages for years, Mr Burgess said.

He told committee chairman John McGuinness just 2,476 residential properties had been repossessed by court order since 2009. Most of these were empty and abandoned.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business