Banks agree to cut loan repayments by up to 90%

BANKS and building societies in Ireland are agreeing to cut loan and mortgage repayments by up to 90% for customers in genuine financial difficulty.

New figures from the Irish Banking Federation (IBF) show around 30,000 borrowers had their payments rescheduled.

An updated estimate expected in the coming weeks from the Financial Regulator is likely to show “continuous forbearance on the part of lenders”.

People in arrears have been warned not to let the problem escalate and to talk to their financial institutions immediately.

According to financial advisors, those having difficulty making repayments are being given significant reprieves from lenders if they can prove a drop in income.

Managing director of financial advice firm, CredyCare.ie, Frank Conway said: “Banks and lenders are prepared to offer payment breaks, in some cases, up to 90% for three years or more.”

In one case, Mr Conway said a couple whose net disposable income fell from €2,300 to less than €300 a month negotiated pro-rata payments that matched the lower income.

He said that the couple presented a repayment plan to their seven creditors and after a period of negotiation lower repayments were worked-out.

“With little sign that the current economic difficulties are about to lift any time soon, there are growing signs that creditors are now more amenable to reducing monthly repayments,” said Mr Conway.

He said many creditors can now see the benefit of agreeing lower monthly repayments.

“They know that it is far better to receive some payment regularly than receive payments on an ad-hoc basis, or worse, no payments at all,” he said.

Operations manager with Irish Mortgage Brokers, Karl Deeter, said the main advice to borrowers is deal with the problem early and often rather than letting it get to make or break point.

“Have your recent bills, bank accounts and other statements ready, that will go into creating your overall budget and give your adviser or the bank a view of your situation so that you can make a work-out plan,” he said.

Latest figures from the Central Bank show that about 36,400 mortgages or 4.6% of all home loans were in arrears for more than 90 days at the end of June.

Head of the Irish Brokers’ Association, Ciaran Phelan said: “It’s an unfortunate reality that in recent times many people chose not to take action when running into financial difficulty and for this reason there has been an avalanche of people who have fallen into arrears and have reached a critical point where court action has either been threatened or initiated.”

An IBF spokeswoman said lenders are doing everything they can to accommodate borrowers in difficulty.

She said resolutions include putting-off for a period all or part of the monthly mortgage repayment, changing the type of mortgage, and tackling arrears by reducing the amount of monthly repayment.

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