Mortgage breaks for six months as 45,000 apply for payment pause

Mortgage breaks for six months as 45,000 apply for payment pause

All five main banks — as well as vulture funds — are set to extend the Covid-19 mortgage payment breaks to six months from the current three months.

It comes as the main banking industry group revealed a “significant” number of hard-pressed home borrowers have already applied for a payments deferral.

Brian Hayes, chief executive of the Banking & Payments Federation Ireland, said at least 45,000 mortgage borrowers — 5% or 6% of all home-loan borrowers — had already applied for payment breaks. He expects more to apply, even as the crisis adds “a massive cost” for lenders.

The former Fine Gael MEP and junior finance minister, who has led the banking industry group since last year, also defended the banks for their handling of customers during the crisis, saying that other businesses, such as utilities, have not been called on to do as much.

He told the Irish Examiner that the banks he represents are in talks with the regulator about extending the breakage period for a further three months. Mr Hayes said he expects the likely agreement to include mortgage-servicing firms and non-bank entities, which have bought large amounts of non-performing mortgage loans from the main banks in the last 18 months.

Mr Hayes said the figure of 45,000 borrowers is a minimum, as it doesn’t include owners of mortgages outside of the five mortgage lenders.

He wouldn’t comment on how many applications the banks have budgeted for in terms of projecting the peak number of mortgage breaks and their costs in handling the fallout of the Covid-19 crisis.

“A lot of this will be predicated on where the economy will be in in a few months’ time. If you took your break out in April, May, [or] June then you have got a decision on whether to extend this — or whether or not you have a job to go back to,” he said.

“We have to see whether an extension is agreed with the regulator, and we are in discussions on that right now about a second payment break. But, as of now, the figures do suggest a significant cohort of people have sought support on this, and it is impossible to know the total and final number.”

The peak number of people who apply for the mortgage breaks will be closely watched as Government and Central Bank officials figure out the financial strains that banks will face in the coming months.

Following the recession 10 years ago, the lenders went into the Covid-19 crisis with strengthened defences but are not fully back to financial health. Economists warn they will inevitably be damaged under a prolonged shutdown of the economy.

The economic toll will become clearer in the next few days when new numbers may show close to 800,000 people are receiving some sort of temporary payment from the Government, or are already on the official unemployment count, only a month into the crisis.

On SMEs, Mr Hayes said the banks had given around 14,000 payment breaks and had 3,200 applications for working capital loans.

He also responded to critics who say the banks should be doing more. “If the banks are being asked to do this amazing deal for people, where are all the other businesses being asked to do the same, I would ask.

“Are the same critics asking the utility firms or every other public utility in the country, are they applying the same discounts? Banking is a business, it is an economically viable business that has to be sustainable.

“There is a massive cost to the banks for this. The banks will take a significant hit as a consequence of this. So asking people to pay a slightly higher mortgage over a slightly longer period is the way it is done here.”

The five main banks are AIB, Bank of Ireland, Permanent TSB, Ulster Bank, and KBC Bank.

Elsewhere, a credit union group said it has received requests to alter payments for mortgages and car loans. “It is clear to see that even six months may not be enough,” said Core Credit Union.

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