Mortgage Arrears

IMHO: ‘Interest only repayments are not a long-term solution to mortgage arrears’

The Irish Mortgage Holders Organisation said the new mortgage restructuring figures are concerning.

LAST WEEK THE the Department of Finance published the first of its monthly reports on the banks’ performance in restructuring mortgages that are in arrears.

The report found that 75 per cent of mortgages in arrears of over 90 days have not been restructured.

The latest figures on mortage restructures gives an insight into the restructuring practices of six of the country’s largest banks – AIB, Bank of Ireland, PTSB, ACC, KBC Ireland and Ulster Bank.

Interest only

The breakdown of the type of restructuring customers are getting states that mortgage holders paying interest only for a period account for 9,046 of the permanent mortgage restructures, while 5,832 pay fixed payments of interest only.

Organisations such as New Beginnings and the Irish Mortgage Holders Organisation (IMHO) have long been critical of interest only solutions stating that they are not sustainable.

Stephen Curtis of the IMHO said they welcomed the publication of the monthly data stating that it will give a month to month account of what solutions banks are offering their customers.

However, he said that having so many customers making interest only payments is concerning.

“It is hard to see how interest only payments made by those in arrears on their mortgage is in any way classed as permanent restructuring. Those customers are basically just paddling water. Mortgage holders often come to us saying they have been put on interest only payments for a period of three or five years, but it is not a long term solution. They will still find themselves in the same position once that period is up,” he said.

Earning power

He said the banks are hoping that mortgage holders earning power will go up within that period so that they can begin to pay capital off their mortgage.

He said that split mortgage solutions are customers best option. This is where the mortgage is split and one portion is shelved.

Mortgage holders pay capital and interest off a portion of the mortgage, while the other section remains untouched for a period. Some banks in Ireland allow customers pay captial only, while others charge interest, it depends on your mortgage provider.

“It gives mortgage holders a better chance of making a dent in their mortgage repayment,” said Curtis, who said it was concerning that only 2,251 customers have been offered this arrangement.

Read: Work to do on mortgage restructuring as long-term arrears remain high>

Read: AIB and Irish Mortgage Holders Organisation to establish third-party advice body>

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