How the home loans idea could help you

THE IMF has cited the example of Iceland, where mortgages were written down to a maximum of 110pc of a household's total assets. How would this work here?

Based on the figure of €135bn of total mortgages outstanding and 770,000 mortgages, the average Irish mortgage is €175,000.

But the real problem is with late-stage mortgages taken out between 2004 and 2008. Based on average house prices during this time and the banks' lending criteria then, one is probably looking at a €250,000 mortgage on a property originally worth €280,000.

Unfortunately property prices have now fallen by at least 60pc meaning that the house is now worth €112,000.

So if we were to follow the Icelandic example the loan would be written down to 110pc of that -- €123,000.

For someone with an original €250,000 mortgage repayable over 30 years at a 3.75pc interest rate, such a write-down would reduce their monthly repayments from €1,157 to just €569, a saving of €588 a month or €7,056 a year.