Negative equity home loan plan

The Central Bank is set to make access to negative-equity mortgages easier for homeowners.

At a speech given to the Harvard Business School Alumni Club of Ireland yesterday, Matthew Elderfield, the deputy governor of the Central Bank, said: “The mortgage arrears problem is one of the biggest remaining challenges for Ireland from the financial crisis.”

Negative-equity mortgage will allow mortgage holders to carry over negative equity from a previous property and add it onto a loan for a new home.

“Simply put, a negative-equity mortgage is a new mortgage to allow a customer to move home where the homeowner is currently in negative equity,” said Mr Elderfield. “It might be provided to facilitate a move to a different part of the country to change jobs or to move up to a larger property in case of a growing family.”

The need to solve the mortgage crisis in Ireland was the key to returning the country to stability, he said, and is directly linked to establishing financial stability in Ireland.

“The link between the mortgage arrears problem and the prospects of overall financial recovery and stability are obvious. It means that the borderline insolvent homeowners who genuinely can’t afford to pay back all their mortgage should get help.

“But it also means that those who can afford to pay continue to do so. And it means that those who can afford to pay but won’t — thereby unfairly adding to the costs to the taxpayer by taking advantage of the current situation — they need to face up to their responsibilities.”

A substantial capital buffer has been put in place to absorb the huge losses banks are expected to take on their mortgage books.

“The Central Bank believes it is time to do just that, and is encouraging a more realistic approach to provisioning,” he said.