Mortgage interest relief 'something we will consider', says McGrath

Finance Minister Michael McGrath said he had met with the banks and non-bank lenders, adding that  they 'have an obligation to work in the spirit of co-operation with borrowers'. Picture: Sam Boal/Rollingnews.ie

The Government is considering financial supports for homeowners struggling with "dramatic" rises in mortgage interest rates, with Finance Minister Michael McGrath warning banks not to allow genuine payers to fall into arrears.

The pledge to help hard-hit homeowners comes a day after the European Central Bank hiked mortgage rates to 20-year highs, and major Irish banks responded with another round of increases.

The ninth increase since the ECB started its campaign of hiking rates 12 months ago was "going to have a real impact on mortgage holders all over the country", said Mr McGrath.

Fixed-rate households face paying €3,500 more annually than they would have a year ago when their loans come up for refinancing.

Mr McGrath promised that mortgage interest relief was “something that we will consider in the context of the budget while recognising that there will be limited resources".

The overwhelming majority of people were making a genuine effort to meet their mortgage payments, and they should not be allowed to fall into arrears, he said.

Mortgage advisers have warned that many households are still reeling from the fallout of the financial crash over a decade ago when their property loans were sold above their heads to vulture funds.

"I will need to examine with my colleagues what represents the best use of our resources, and how can we target our resources to those that need them the most," said Mr McGrath.

"That's a judgement that we will have to exercise as we approach final decisions in respect of the budget, but I do acknowledge that the dramatic increase in interest rates for such a short period of time is having a real impact on households."

He stressed that the onus is on banks to work with distressed borrowers following the interest-rate hikes.

"We don't know how long they will remain high and when they will start to fall, but I certainly do expect lenders now to work with borrowers and make sure that people are supported because the rate of increase of 4.25% over a 12-month period has come as quite a shock,” he said.

He said he had met with the banks and non-bank lenders and they "have an obligation to work in the spirit of co-operation with borrowers".

AIB chief 'not aware of any eyebrows being raised'

The finance minister was speaking on the day that AIB delivered bumper operating profits of €1.2bn at the half-year stage, and predicted an “exceptional” outcome for the full year, thanks to ECB rate hikes.

Bank of Ireland and Permanent TSB are also expected to outline huge windfalls from rate hikes and from the further rapid contraction in competition in the Irish banking market when they report next week.

Irish banks have come under pressure this year over the paltry deposit rates they offer savers even as they charge significantly more for their mortgage loans.

However, AIB chief executive Colin Hunt has defended the huge returns.

On a conference call with analysts, Mr Hunt was asked whether he anticipated pushback from Irish regulators, or from any other sources, over banks generating hefty income returns.

Mr Hunt stressed the “exceptional” nature of the financial returns this year, and insisted the lender was seeking to build a profitable base to sustain appropriate levels of lending for future years.

“I am certainly not aware of any eyebrows being raised in any quarter in relation to the exceptional performance we have delivered," said Mr Hunt.