Banks to bring in pilot initiatives to tackle mortgage crisis

A number of schemes to tackle the mortgage crisis are to be introduced next month by banks and financial institutions.

The pilot initiatives will focus on unsustainable long term mortgages and follow a request by the Central Bank that all institutions submit plans on solutions by the end of this month.

Figures to be released today by the Central Bank will underline the scale of the problem — with 80,000 (or 10.5%) of mortgages now over 90 days in arrears.

The Central Bank has received several proposals from banks including mortgage to rent, negative equity mortgages, and split mortgages.

The pilot programmes are to be completed by the end of September. If successful, they will be rolled out on a wider scale in the autumn.

The schemes include:

nA mortgage to rent scheme: The mortgage holder would surrender ownership of the house and become a tenant. A housing association would then buy the property from the bank and become the landlord. This scheme is being piloted by AIB.

nNegative equity mortgages: The scheme would allow customers trade up or down, carrying an amount of negative equity to the mortgage for a new house.

nSplit mortgages: This is where part of the mortgage is put on hold. The holder continues to pay what they can while the remainder is warehoused for payment in the future.

At least one bank has submitted a proposal to the Central Bank that would allow homeowners with valuable tracker mortgages to keep the low rates they currently pay.

Bank of Ireland confirmed it “has in place a number of mortgage restructure and resolution options”.

A spokesperson said: “In addition we are evaluating and progressing a number of additional long-term forbearance solutions in line with the findings of the report of the inter-departmental group on mortgage arrears.”

Felix O’Regan, director of public affairs with the Irish Banking Federation, said the pilot schemes showed the banks were working on solutions.

Meanwhile, the latest CSO house price survey shows prices in Dublin have risen for the second month in a row while property prices nationally fell 1.1% from last month.

Average prices in Dublin are down 57% from the peak. Prices elsewhere fell by 2% in April compared with a decline of 1.3% in April last year.