Covid-19: Banks 'very unlikely' to relieve mortgage holders

Irish banks are “very unlikely” to relieve up to 140,000 mortgage and business customers on payment breaks of interest charges on their loans, despite controversy over the practice.
Covid-19: Banks 'very unlikely' to relieve mortgage holders
Sinn Féin TD Pearse Doherty

Irish banks are “very unlikely” to relieve up to 140,000 mortgage and business customers on payment breaks of interest charges on their loans, despite controversy over the practice.

Controversy has arisen after the Central Bank of Ireland and the European Banking Authority (EBA) confirmed that banks were not required to charge additional interest on Covid-19 mortgage breaks.

Since March, nearly 80,000 mortgage holders impacted by the pandemic have taken payment breaks which will see additional interest charged by as much as several thousand euro over the lifetime of the loans.

Sinn Féin TD Pearse Doherty has accused banks of

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Mr Doherty said it was an issue where the Government should step in as banks across European countries had not charged customers interest on mortgage breaks.

“Charging interest accrued on loan payment breaks during Covid-19 is the banks profiteering on the pandemic,” he said.

“The idea here from the banks or indeed the Government that these new guidelines are a bolt from the blue… does not add up. I have a letter from the Central Bank where they told me that banks don’t have to charge interest rates on the breaks.”

In the Dáil today, Labour leader Alan Kelly looked for assurances from Taoiseach Micheal Martin that customers would not be liable for thousands of euros worth of interest if they availed themselves of a mortgage break.

Mr Martin said Finance Minister Paschal Donohoe would engage with the banks on the matter in relation to this latest clarification from the EBA.

Mr Doherty accused Brian Hayes, chief executive of the Irish Banking and Payments Federation, and other bankers of "trying to spoof the Minister for Finance" on the issue.

Mr Hayes refuted Mr Doherty's claims, and said he would be happy to engage with the minister and banks on the matter.

Speaking to the Irish Examiner, Mr Hayes said: “The Irish payment break moratoria including the accrual of interest is, always has been, and remains fully in line with EBA guidance.”

The guidance stated that the sequencing of loan repayments could be changed but the interest rate could not; and if the interest rate was changed, this could be classified as forbearance. This advice, said Mr Hayes, did not change until this week.

He said there is a cost to the industry to the provision of payment breaks and asked if it was fair those customers who took a payment break pre-Covid and accrued costs, or to the 90% of customers who continued paying their mortgages during the pandemic, if costs are not applied.

Other customers will bear the brunt if costs are not paid by those who availed of a mortgage moratorium, said Mr Hayes.

"If we said to one group of borrowers who have paid interest accrued before Covid, or who've moved off the first payment break and have agreed their contract with their lender, what would be unfair is to pull the rug out underneath them", he said.

 

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