BANKS are prepared to give under-pressure householders a break on paying their mortgages, to allow them time to pay off other debts.
Struggling homeowners would be able to take a holiday on their mortgage payments, to allow them time to get on top of credit card debt, car loans and other debts that have got out of control.
The Irish Banking Federation (IBF) said yesterday it was opposed to including mortgage debt in new debt settlement deals which will be negotiated outside the courts.
But the IBF's Eimer O'Rourke told a mortgage conference yesterday that banks could allow people who had entered into a repayment deal on non-mortgage debt a break on home-loan repayments too.
Details are sketchy at the moment, but the deal is likely to see people allowed to stop paying their mortgage for maybe a year, with that year added to the term of the home loan.
Ms O'Rourke said: "A mortgage creditor may in individual cases decide to afford the debtor some space."
She said that any offer of a break on mortgage payments would only apply where the mortgage was judged to be sustainable -- where there was a reasonable expectation that the home loan would be repaid over the full term. Banks would have a role in deciding which mortgages were sustainable.
The banks, the Central Bank and the Department of Finance all oppose proposals from the Department of Justice to allow homeowners to get mortgage debt written down in a new non-court debt settlement process.
The Department of Finance does not want defaulters to be able to write down mortgage debt without being declared bankrupt. This is because of the impact it might have on the recapitalisation of the banks and the country's return to the bond markets in 2013.
The Government is set to publish legislation in the next few weeks that will give financially distressed homeowners the option of having some of their debts written off as long as they meet strict conditions.
The new scheme will stop indebted households having to go to court to declare themselves bankrupt to get some of their non-mortgage debts wiped out, Ms O'Rourke said.
"A repayment plan will be put in place in agreement with the lender for five years. Any debt that is not repaid after this period is then discharged [written off]," she told the IBF mortgage conference.
Ms O'Rourke said there had been a recognition in Government "that it is time to move towards resolution" of unsustainable mortgages.
But she warned that it was important not to make it too easy to walk away from commitments for those who bought during the boom, and who have also racked up other big debts.
This would be a case of "allowing those who bought in the last 10 years to create problems for those buying in the next 10 years" -- because banks facing huge losses from recent borrowers would be forced to make it more expensive for new borrowers to take out loans.