Labour split on debt relief plan for home owners

A SPLIT has emerged in the Cabinet over calls for a national debt relief scheme for troubled mortgage holders.

Tánaiste Eamon Gilmore last night rejected suggestions from Labour ministers that the Government should consider a wide-scale debt forgiveness system.

His comments come after it emerged lenders have begun writing off debts for borrowers after taking back their homes, through talks with advocacy group New Beginning.

But the Labour leader ruled out the Government financing any extensive write-off of debts.

“I think some kind of a blanket writing-off of mortgage debt, which has been suggested by some, is not what the Government is considering,” he told RTÉ.

“What we are developing are proposals that will be fair to those who are in difficulty paying their mortgage, fair to those who are paying their mortgages and, of course, fairest to the taxpayer who is going to have to fund it.”

Economist Morgan Kelly last week said 5 billion to €6bn would help end the mortgage crisis.

Mr Gilmore’s comments are at odds with other Cabinet and party members.

Labour minister Joan Burton yesterday said the Government should consider a debt resolution scheme similar to one in Iceland. The Social Protection Minister said mortgage repayments could be based on the value of the home rather than the original loan.

The Icelandic government and lenders have agreed to reduce the cost of certain mortgages to 110% of the value of the property.

Housing Minister Willie Penrose earlier this week said it would be “foolhardy” not to look at a wide-scale debt forgiveness scheme.

A Government-appointed committee, also looking at measures to assist borrowers, is due to report shortly.