No mortgage bailout as 32,000 fall into arrears

LOANS CRISIS: Regulator rules out NAMA-style help for families

Michael Lavery

A SHOCKING 32,000 homeowners could not afford to pay their mortgages in the first three months of this year and have run into arrears.

Financial Regulator Matthew Elderfield has warned that "there is no silver bullet solution for mortgage arrears" with very little likelihood of any major financial bailout.

The numbers in difficulty have jumped by 4,000 since the end of last year, according to figures released by the regulator.

Mortgage experts, however, believe the true level of debt among house owners is far worse since today's statistics do not include the thousands who have negotiated a deal with their lender to reduce repayments.

These are people who have either agreed to take a temporary "payments holiday" or who have opted to pay only the interest on the loan in a bid to cut repayments for the moment.

Many of those on the arrears list have not made a repayment for a year or more and it is understood that a large number of those with the biggest debts took out mortgages with subprime lenders who typically charge interest rates of 7pc -- almost double that of other lenders.

Anyone on a €300,000 mortgage who fails to repay for three months will rack up arrears of €4,000 for that period alone.

Mr Elderfield, who is part of a Government-appointed expert group considering solutions for over-indebted families, has warned that there can be no quick fix to the crisis.

He has criticised lenders for attempting to get people to give up their good-value tracker mortgages in return for the lender agreeing to do a deal to reduce the repayment levels on a temporary basis.

The regulator explained that any plan to try to help householders in difficulty needed to "recognise that the cost of any support will be borne by their neighbours".

The neighbours were people who may have "avoided excessive borrowing themselves or are gritting their teeth and meeting their obligations" said Mr Elderfield, ruling out the possibility of a so-called "NAMA for the little people".

"We must be careful that any approach doesn't provide financial incentives for the arrears problem to get worse," he said.

His office was working on a number of recommendations to tackle the problem of mortgage arrears, but he warned there needed to be "a sense of realism as to what can be achieved, given the financial constraints".