Monday 20 January 2020

Some good news for homeowners

Yesterday's house price statistics from the CSO and the announcement that the Government will submit its proposals for restructuring mortgage bank Permanent TSB to the EU by the end of June is the best news Irish homeowners have had for many a long day.

House prices were unchanged in March, according to the latest CSO house price index, which was published yesterday. The CSO figures showed that, while house and apartment prices are still falling outside of Dublin, house and apartment prices actually rose slightly in Dublin last month.

The CSO figures confirm anecdotal evidence that, in Dublin at least, the worst may be over. However, with Dublin house and apartment prices having fallen by an average of 57pc over the past five years, the situation remains grim.

The latest figures from the Central Bank show that almost 71,000 homeowners were more than 90 days in arrears on their mortgages at the end of December. When those mortgages that are less than 90 days in arrears and those that have been restructured are added, no less than 158,000 mortgages, more than one in five of the total, are in distress.

In addition to these, hundreds of thousands more homeowners are trapped in negative equity, where the value of their home is less than the amount owed on their mortgage.

A bottoming out of house prices, if indeed this is what is now happening, will do little to help these people.

Yesterday's other announcement, that the Government would be submitting its plans to restructure Permanent TSB to the EU by the end of June, provides some room for optimism. Under the Government's plans, Permanent TSB will be split into "good" and "bad" banks. "Parking" Permanent TSB's bad loans now holds out the prospect the bank will be able to cut its variable mortgage rate, currently the highest of any mainstream lender at over 5pc.

This would deliver much-needed further relief to up to 80,000 hard-pressed homeowners who are currently paying high interest rates on their mortgages. As we report today, there is now a firm expectation of reductions. A cut in the Permanent TSB variable mortgage rate to the AIB rate of a little over 3pc would have a transformative effect on the finances of these households and would serve as a much-needed boost to the economy.

So is the housing glass half empty or half full? After five years during which this country experienced what was in proportional terms the most severe property price crash and banking bust recorded in by any developed country since World War Two, we desperately need some good news. Yesterday's twin announcements at least give us some grounds for hope.

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