Time for the piper to call tune on mortgages

At moments of frightening flux, certainty is the most precious gold.

It allows us, or at least convinces us, that we can see beyond the maelstrom and take some control over our lives and maybe, just maybe, design what seems an attractive future.

Today we expect certainty from our Government and EU power brokers, though it is impossible to predict with any precision how the EU or the euro will stand in May 2013. Of course, it would be reassuring if it were otherwise, but it is not. In these fraught days, next week’s referendum is as much about creating an environment to help renew confidence as it is about anything else. It is about agreeing disciplines to correct the faults inherent in the euro and, hopefully, allow all Europeans enjoy the prosperity that has always been a core ambition of the EU. If this does not happen then there will be a Greek EU and a German EU. Though it is not a certainty, just a very strong probability, we will be in the one that produces ouzo, not the one that produces Riesling.

That project is immense and unsettled, but there are areas where Government intervention can help create at least a strand of certainty. Yesterday’s figures on mortgage arrears point to one.

The Central Bank reports that nearly 78,000 mortgages were in arrears of 90 days or more at the end of March. This represents an increase of nearly 8,000 over just three months. The number of mortgages in arrears or restructured was 15.2% of the total residential market at the end of March, up from 14% at the end of last year. These figures do not include personal debt, and represent a far higher percentile of the country’s mortgage debt. Some suggest the 78,000/15.2% equates to just over 20% of all domestic mortgage debt.

This is a calamity for the individuals and families involved. For the lenders, especially those who offered 100%-plus mortgages, topped up with a car loan to seal the deal, this is indeed the dreaded day of reckoning.

Taoiseach Enda Kenny yesterday promised that anyone who makes a real effort to repay their mortgage will not be made destitute. His Government has promised personal insolvency legislation as part of the resolution of this crisis. It cannot come soon enough.

Unfortunately, there is far too much of the air of a supplicant around Mr Kenny’s declarations. It is not as if what we still call banks are real businesses any more. They are taxpayer-subsidised sub-branches of Government, just like Bord na gCon or Córas Tráchtála. Yet they retain enormous power over individuals and businesses, though it is not entirely clear whose interests are being served by the application of that borrowed, subsidised power. As we saw in recent days, when Irish Life & Permanent was told a few home truths about punitive mortgage rates, some lenders need to be brought into line by their owners. In this instance, ordering IL&P to cut their rates would make a good apéritif for one of Mr Kenny’s enforcers.

In recent day,s the wisdom of Lord Acton, Regius Professor of Modern History at Cambridge in 1895, has been invoked. He was once MP for Carlow and gave us the truth “power tends to corrupt, and absolute power corrupts absolutely”. Another of his shrewd observations is pertinent: “The issue which has swept down the centuries, and which will have to be fought sooner or later, is the people versus the banks.” Standing between homeowners unable to repay mortgages and insistent lenders would be a very good way to begin this process. And, Mr Kenny, it would be the right thing to do.


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