Home arrears ‘biggest legacy’ of crisis

THE number of homeowners who could not afford to pay their mortgages increased in the first three months of this year.

Figures to be released today by the Central Bank will also show that the number of home repossessions continues to rise across the country.

Commenting on the findings and the fact that at the end of last year just under four in every 100 mortgage holders were 90 days or more behind on repayments the Financial Regulator, Matthew Elderfield, suggested mortgage arrears may be the “biggest legacy” of the financial crisis.

However, he poured cold water on the idea of “a NAMA for the people”, however, suggesting there was no “silver bullet” solution for mortgage arrears.

He said that in seeking to help households in difficulty, it needs to be recognised that the cost of any support will be borne by people who avoided excessive borrowing or are “gritting their teeth and meeting their obligations”.

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

Mr Elderfield said, however, that 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 canbe achieved, given the financial constraints affecting both government and the banks”.

The Financial Regulator also suggested that the growing trend of some banks providing incentives for customers to switch from tracker to variable rate mortgages did not, he believed, comply with the code which requires firms to act in the best interests of their customers.

Responding to this trend, the chief executive of the Irish Brokers Association, Ciaran Phelan said that mortgage holders should not feel pressured into changing their loan terms or switching to another provider.

“Many mortgage holders are reviewing their situation – however, for many, there may be no cause to take any action at present and doing so may end up costing them in the long run,” Mr Phelan said.

Mr Elderfield, who was speaking at the Insurance Institute of Ireland annual conference, also said Ireland’s banks will need “significant government support” to meet new capital requirements he has set.

Also speaking at the conference, the Financial Services Ombudsman Bill Prafiska said he wanted more powers to name and shame rogue traders.

Bill Prafiska, who came into office two months ago, said legal rules barring him from naming rogue traders are inconsistent with the aims of the office.

“We are here to promote the integrity of the financial services industry in the eyes of the public.

“It is difficult to understand how this can be achieved if our public profile can be characterised as the publicising of industry wrongdoing while simultaneously shielding the wrongdoers from public accountability.

“If certain firms are operating unscrupulously, why can’t the public at least know who they are,” he said.