Burden on mortgage holders

I was a little perplexed to see that the Labour Party has given an unqualified welcome for the “Mortgage to Rent” scheme — or maybe I misunderstand what is involved here.

According to the Housing Agency, that scheme does not allow for any debt forgiveness to the family involved and, in fact, when the family struggling with the mortgage hand back the keys of their home, what happens next under this scheme is that a private housing association, such as Cluid or Respond, then buy the house from the bank at the current market value and then rent it back to the previous owner under existing social housing rules.

However, the difference between the current market value and the amount originally borrowed remains owed by the family and they must enter a separate arrangement to pay that back to the bank.

For example, a house that cost €350,000 during the bubble is now valued at €175,000. In that case either Cluid or Respond get the house for the written down price of €175,000, which leaves €175,000 still owed by the original mortgage holder who now must enter a separate arrangement with the bank to pay that back. Along with the family now paying rent to Cluid or Respond they also must pay back to the bank the massive difference between what Cluid or Respond paid for the house and the original price paid.

This does not strike me as being a very good deal for the family involved, as the burden that they will be placed under will be enormous.

They will have to carry the €175,000 debt for the rest of their lives, for which they get nothing, and pay a rent while Cluid or Respond ride off into the sunset with the deeds of the house to make income from in perpetuity.

The real winners here are Cluid/Respond and the banks — who recklessly lent in the first place. And that shouldn’t come as any surprise, as it was Cluid and the banks who put this scheme together.

It is very sad to see Labour buying into the housing policy of the last Government, which was designed to facilitate developers and speculators rather than provide accessible housing for all.

It is equally depressing to see private housing associations, whose remit is supposed to be to work to solve housing difficulties for those on low incomes, work hand in glove with such policy solely because it allows them to grow their operations.

It is time they too stood back with Labour and asked whose interest exactly it is they are now serving.

Jim O’Sullivan

Rathedmond

Sligo