Debt crisis comes home to roost: No end in sight unless rates are cut

EVEN though this moment, long denied in the hope that it might never arrive, has been anticipated for nearly a decade, figures released yesterday by the Central Bank predicting a short-term tsunami of home repossessions, and all of the heartbreak that infers, are still chilling.

The figures, suggesting that around 26,000 homes may be in jeopardy, represent an acid test of this society’s commitment to solidarity and some form of an active, worthwhile social contract.

They will also go some way to defining whether we regard ourselves as a society subservient to an economy or a society that uses economics — and banking — as tools to try to lift all boats.

In a society where the folk memory of a time when security of tenure was a luxury only those with unencumbered homes could rely on still resonates so forcefully, the suggestion that nearly 40% of mortgage arrears solutions proposed by banks may mean the loss of properties, many of them family homes, is more than challenging.

Even if all of the wishful, free-ride fantasies are put aside, these figures represent a considerable challenge for any Government, even one committed to a soft-landing approach for those caught by this terrible legacy of our days of madness and property bubbles.

The six banks involved in the Central Bank’s mortgage resolution programme — AIB, Bank of Ireland, Permanent TSB, Ulster Bank, ACC, and KBC — must report regularly on the number of proposed and concluded solutions with borrowers in arrears.

Yesterday’s sobering figures showed that “concluded” solutions, 26,300 out of 67,600 involve repossession of a property, with almost 17,000 of these repossession threats involving home-owners and the rest to buy-to-let buyers.

There is a tiny proportion of those borrowers who had little or no intention of ever discharging their debt but the great majority of the 17,000 borrowers involved would far prefer to be able to pay their mortgage, or a good proportion of it, than face being evicted.

That reality should be the starting point for any resolution.

Current figures indicate that the number of repossessions is low — around 4,000 home owners had faced repossession orders up to the end of last year though many more would have sold their home to a third party and so lost ownership.

As is usual, there are two sides to every story. As the Central Bank announced these figures Minister for Finance Michael Noonan met its governor to discuss the interest rates banks charge home owners.

Speaking in the Dáil, Mr Noonan conceded that “standard variable rate mortgage customers are an exploited group of customers. They are paying way over the odds and something needs to be done about that”.

Earlier, Fianna Fáil finance spokesman Michael McGrath said Bank of Ireland admitted its cost of funds was 1.15% but the standard variable rate for existing customers was 4.5%.

Forcing banks to cut unjustified rates might do little enough to help those already in deep difficulties but it might go some way to ensuring that this crisis is finite and that those at the pin of their collar, but meeting their obligations, will not be in such a terrible position before too long more.

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