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Mortgages

Borrowers may be able to leave tracker mortgage when rates increase

The new Code of Conduct for Mortgage Arrears will allow borrowers to move to a variable rate instead of repossession.

HOLDERS OF TRACKER mortgages may be able to leave them when their interest rates rise, and move onto a variable-rate mortgage which may be cheaper, as an alternative to having their home repossessed.

The Central Bank’s new code of conduct for mortgage arrears, published this morning, allows banks to enter into arrangements where a borrower can leave their tracker mortgage as a last resort – going onto another type of mortgage as an alternative to losing their house.

The new code of conduct also overhauls the system which governs how regularly a bank can contact their borrower – with the end of the three-times-per-month rule, in favour of individualised policies which must be approved by the bank’s board of directors.

These new rules, the Central Bank said, will “protect borrowers against unnecessarily frequent contracts and harassment” – while also ensuring that lenders still have the freedom to make contact as often as is necessary to proceed in a case.

This could, however, leave it up to banks to approve procedures that involve more regular direct contact with customers trying to encourage them to make their payments.

Borrowers who may encounter difficulty in repaying their loans must also now be given a minimum of eight months from their first missed payment before legal action can be taken against them – and four weeks’ notice of being reclassified as ‘non co-operating’.

Similarly, at the end of the mortgage resolution process, a borrower must be given three months to consider their options – including a personal insolvency arrangement – before legal procedures can be taken against them.

Struggling borrowers must also now be given a ‘Standard Financial Statement’ form at the earliest possible opportunity, and also be offered the assistance they need to complete it.

“The protection of borrowers who are facing or are currently in mortgage arrears, and the resolution of those cases, remains a top priority for the Central Bank,” said its director of consumer protection Bernard Sheridan.

We carried out this review to strengthen consumer protections where necessary and to ensure the Code is facilitating the resolution of each arrears case in a fair, sustainable and transparent way.

The changes to the Code support these objectives and ensure that borrowers who cooperate with their lender retain their protections throughout the process.

Read: 95,000 Irish homes are in mortgage arrears over 90 days

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