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EU mortgage break to help families cope

HOMEOWNERS struggling under a mountain of debt may be a given a mortgage "holiday" to help them pay off loans, credit card bills and overdrafts.

The Government and the bailout troika of the EU, European Central Bank and IMF have asked the banks to consider allowing householders to stop paying their mortgages to give them a chance to reduce debts and stay in their homes.

Bank of Ireland, AIB and Irish Life and Permanent met the troika on Monday ahead of tomorrow's publication of the fourth "report card" on whether Ireland is meeting the terms of the EU-IMF bailout.

The proposal to allow a mortgage break is one of a number being considered as part of a reform of Irish bankruptcy law with one idea involving the banks agreeing to reduce mortgage repayments or "forgive" some mortgage debt.

If adopted, it would last up to five years and borrowers would then return at a later date to repaying their mortgages.

Minister for Finance Michael Noonan said early reform of personal insolvency law was "a central element" in most of the solutions in the recent report on tackling mortgage arrears.


There was "no magic solution" to the problem, he said.

The banks have already received €62bn from the Government and troika officials are said to have queried the effect of debt settlements for individuals on the capital of the banks.

Meanwhile, hopeful home owners will find it more difficult to get a mortgage under strict new Central Bank rules. They will now have to prove they can cope with a series of interest rate rises before a mortgage can be sanctioned.

The tighter rules, effectively "stress tests" on borrowers, means that someone getting a €200,000 mortgage will have to show they could bear up to €120 extra a month in higher repayments.

The new rules, published today, will make it almost impossible for ordinary people to take out an interest-only mortgage, whether it is to buy a home or as an investment.

Only those who show they have the funds to pay off the principal at the end of the mortgage will get an interest only deal.

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