Banks told ‘take long-term view’

THE number of homeowners looking for help from their bank has doubled in the last few months.

Banks have also been urged to take a longer term view to mortgage restructuring so that homeowners have more security.

According to the Central Bank, the number of new mortgage restructures has doubled in the latest quarter, up from 3,500 to 7,000. The bank said 39,395 mortgages that are not in arrears have been restructured. This includes offering the homeowner interest-only repayments, a mortgage-holiday or a reduced payment.

In extreme circumstances brokers said banks are allowing homeowners to sell their house and walk away from the remaining debt. They are also giving serious consideration to writing off mortgage debt in exchange for a stake in a house.

Of the restructured mortgages, 25,786 people are paying interest only while 10,777 are paying a reduced payment greater than interest only. The figures show that 9,410 have had a term extension agreed while 9,405 are paying back less than the interest.

The prospect of a mortgage-holiday is less popular with 2,163 agreeing that. The interest rate was adjusted on 3,269 mortgages.

Chief executive of the Irish Brokers Association Ciaran Phelan said the doubling of mortgage restructures means the banks are starting to understand this is the only real solution.

Mr Phelan said the number of mortgages in arrears that were restructured needs to rise significantly if the growing level of arrears is to slow down.

“Where the restructuring of mortgages is undertaken, it should be set on longer-term basis of at least five years to create a degree of security for the householder and give them time to get back on their feet. Options including debt-for-equity swaps and debt write-off are appropriate particularly as many of these mortgages are simply too big for our reduced incomes in 2011.”

Director of the Irish Mortgage Corporation, Frank Conway, said that in additional to rising mortgage costs, other day-to-day expenses have also risen sharply this year, including fuel, utilities and insurance.

The Irish Banking Federation said the figures are the expected outcome of a deteriorating economic situation for some borrowers and it illustrates that mainstream lenders are working responsibly with their customers to manage the situation where the basis for doing so exists.

The federation said that while recording an increase, the level of repossessions still remains comparatively low at 22 per 100,000 mortgages compared to 80 per 100,000 in Britain.

Homeowners in difficulty have been urged by the Central Bank to make contact with their lender as early as possible so that they can benefit from the protections offered by the Central Bank’s revised Code of Conduct on Mortgage Arrears.

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