Tough year for homeowners

AN EXPECTED rise in interest rates coupled with continuing increases in unemployment could mean this will be the toughest year yet for homeowners struggling to pay mortgages, Ireland’s largest housing charity has warned.

Respond! said it expects tens of thousands more families to have problems paying their mortgages this year.

They fear that the 26,000 homeowners reported as having difficulties paying mortgages last year are “just the tip of the iceberg”.

An Irish Mortgage Brokers report this week recommended that homeowners immediately move their mortgage to a fixed rate as lenders could push up their variable rates by up to 1.5% over the next 18 months. Eight out of 10 homeowners have variable mortgages.

Respond! Housing Association spokeswoman, Aoife Walsh, warned many people are meeting mortgage repayments through savings or redundancy payments but these will run out.

“With the expected rise in interest rates by both the European Central Bank and our financial institutions, the amount of families in mortgage arrears will continue to rise dramatically. In the past 18 months alone, we have seen the number in arrears increase by 89% and we fear this will continue to increase. For the vast majority of these families, the option of selling the home to repay the mortgage simply doesn’t exist as recent reports have indicated that house prices have fallen between 30% and 40% and many are in negative equity,” she said.

Respond! welcomed Finance Minister Brian Lenihan’s extension of mortgage interest relief to those who bought at the height of the boom but argue this does not go far enough.

“Many may see their mortgage repayments increase by hundreds of euro each month this year with interest rate increases expected as early as March. Considering Ireland has the third-highest rate of household indebtedness in Europe Respond! maintains that difficult times still lie ahead.”

The charity called on the Department of Finance to examine its proposed support scheme so that if a person’s income is dramatically reduced or they become unemployed, the Government temporarily pays up to 30% of mortgage interest owed and banks a further 40%.

* www.respond.ie.

* www.welfare.ie.