Banks 'could write off some debts'

Banks have enough money to write off some mortgage debt after being bailed out by the taxpayer, Finance Minister Michael Noonan has claimed.

As the Cabinet met for the first time since the summer break, the minister said the Government would deal with the difficulties faced by struggling homeowners.

Although new figures reveal 55,000 householders are behind with their repayments for more than three months, Mr Noonan said it was a manageable problem.

“We’re aware of the difficulty for some time, but of course because we recapitalised, the capital is in the banks to allow the banks write off some of that debt,” the minister said.

“It’s a manageable problem, but it’s very onerous on certain individuals and the Government will deal with it.”

The Government agreed to pump another €24bn into the country’s banks last March in a bid to win back confidence from international money markets, taking the total bailout bill to €70bn.

Mr Noonan said the stress tests carried out at that time also focused on the value of mortgages and the borrowing plans.

Economist Morgan Kelly has urged the Government to consider writing off the debt, claiming it would cost up to €6bn.

Housing Minister Willie Penrose said a scheme should be considered, while Social Protection Minister Joan Burton has called for a debt resolution mechanism to allow struggling mortgage holders reach a deal with bankers and avoid going to court.

Junior Finance Minister Brian Hayes said a blanket scheme would pose problems.

However under a proposal being considered by Government, the Money Advice and Budgeting Service would have legal powers to compel banks to strike a resolution with families making an honest effort to repay their debts.

Figures released yesterday show more than 55,000 mortgages are now in arrears for more than three months.

The number of homeowners falling behind in their repayments has jumped from 49,609 at the end of March to 55,763 at the end of June.

A Central Bank report shows that more than 7% of all mortgages in the State are in arrears for more than 90 days.

Taoiseach Enda Kenny, on his way into the Cabinet meeting, said the Government was acutely aware of the mortgage difficulties.

“I mean in all of these cases people borrowed money, banks lent money, because of circumstances sometimes outside their control, there are now difficulties,” Mr Kenny said.

“The Government and members of the Cabinet are acutely aware of this because we meet them every day.

“So, as you know, we have commissioned a report on a broad range of issues here and we will make decisions when that comes to hand.”

Mr Kenny said there was a lot of challenging political work ahead, but the Cabinet would not shirk its responsibility.

“I will be getting reports from all our ministers about the work that we have to do to the year end and the budget towards the end of the year.

“So there have been optimistic steps and confidence building measures happening over the summer but there is a great deal of work up ahead and the Cabinet will not shirk its responsibility, both in telling the people what the scale of the problem is, and how we propose to deal with it.”