THE DEPARTMENT OF FINANCE has ruled out the prospect of a blanket programme of debt forgiveness, saying it is not a “realistic option” – but the Minister, Michael Noonan, has said banks should be able to write off some home loans.
Speaking outside this morning’s cabinet meeting, the first of the new term, Noonan told reporters that the successive rounds of stress tests had identified how much cash banks would need in order to absorb a reasonable amount of mortgage losses.
With the banks recapitalised as a result, “the capital is in the banks to allow the banks [to] write off some of that debt,” the minister said.
Noonan’s comments came just hours a spokesperson for his department said there would be no “magic bullet” solution to the issue of personal debt.
That spokesperson was responding to figures which showed that one in every 14 mortgages in Ireland was at least 90 days’ in arrears – and that over one in 20 mortgages were in arrears of over six months.
Yesterday the government also confirmed that claims for its Mortgage Interest Supplement had increased almost fivefold in the last four years.
“The government’s Economic Management Council has asked that further work be carried out to consider additional measures to alleviate the increasing problem of mortgage over-indebtedness,” the spokesperson said.
The issue of mortgage indebtedness is complex, and it is clear that there is no ‘magic bullet’ or ‘one-size-fits-all’ solution.
While the spokesperson said the idea of blanket forgiveness was not a “realistic” option, debt settlement would be an “inevitable outcome” under bankruptcy or other non-judicial forms of debt settlement.
On yesterday’s Drivetime on RTE Radio 1, junior finance minister Brian Hayes also ruled out a debt forgiveness scheme.
Fianna Fail’s finance spokesman Michael McGrath said the government’s statements were resulting in mixed messages being sent to mortgage holders