| 8.3°C Dublin

Central Bank governor urges mortgage action

THE Governor of the Central Bank has urged "imaginative design" of debt restructuring arrangements and said the time for "passivity" on mortgage arrears has passed.

He said the idea of a split mortgage, which allows borrowers to service only a portion of their debt at least on a temporary basis, could be "fleshed out". This would allow people to stay in their homes, Patrick Honohan said.

At a conference at UCD and NUI Maynooth in Dublin, the governor said the persistent rise in cases of prolonged mortgage arrears "undoubtedly presents one of the biggest economic policy challenges of our day".



"Wait-and-see may have been an appropriate or sufficient initial position to take as the great crisis unfolded, but the time for passivity is long past," he said.

"The longer term welfare of borrowers is at stake here, but so is the welfare of taxpayers and users of public services, given that bank losses affect the Government because of its ownership of banks."

Where a mortgage is split, banks should consider limiting their recourse on a loan to a fixed share of the property value.

"Such an arrangement serves to enhance the borrower's stake in continuing to service the new contractual arrangement and could work out better in the long run for both borrower and lender,'' he said.