Political pressure grows for Scottish-style mortgage rescue plan
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The Irish government is under increasing pressure to produce a rescue plan for struggling mortgage holders as arrears mount and interest rates rise.
Almost 80,000 households are currently in arrears on mortgage and rent payments, according to figures from the country’s Central Statistics Office. And the situation is likely to worsen as unemployment - already at 12.5% - continues to grow.
With interest rates on the up many cash-strapped families are fighting a losing battle to keep their homes as mortgage defaults hit almost £5bn.
One of the country’s largest providers of home loans, Permanent TSB, provoked a storm of criticism when it raised its mortgage rate by 0.5% recently, the second hike in a year.
Other major players such as Allied Irish Bank and Bank of Ireland are expected to follow suit despite being kept afloat by large injections of taxpayers’ money.
And a further round of increases could be on the way if, as predicted, the European Central Bank raises its rate by 0.5% this summer.
In the Irish parliament Taoiseach Brian Cowen has ruled out ministerial intervention to halt rate rises by lenders ahead of an ECB decision.
But he says: “The government will continue to look at how to assist mortgage holders.”
Cowen has announced the establishment of a review group to draft such a support scheme following talks with relevant parties including big banks.
One solution to the crisis has already been proposed by a parliamentary committee on social and family affairs.
In a report just published it recommends the government should introduce a mortgage rescue plan similar to that in Scotland which involves the state or the relevant lender taking an equity share in homes at risk of repossession.
Under the scheme mortgage holders would continue to own their homes and be responsible for maintaining and insuring them. But as part-owner the state would also make repayments to the lender, thus reducing householders’ monthly mortgage bills to manageable levels.
Alternatively, the banks involved could lease properties back to householders at an affordable cost.
The committee says that between 2004 and 2006 Irish mortgage debt increased at three times the rate seen in the European Union. It warns that where lending has been reckless all responsibility should not rest with borrowers.
It says: “Liability should be shared by financial institutions and, if necessary, the brokers who arranged loans.”
Meanwhile, in one of the most high profile cases seen to date the home of Dr Conor Cruise O’Brien, the former Irish cabinet minister who died two years ago, has been surrendered to Irish Nationwide Building Society.
His widow and his family are unable to repay the mortgage of more than £1.4m.
House prices in Scotland show 5.9% quarterly rise
The latest Scottish House Price Monitor from Lloyds TSB shows that in the three months to 31 January 2010 the price of the average domestic property in the country rose 5.9% compared with the previous three months, to £160,074.
Although house prices are now rising again, on an annual basis Scottish property values have fallen by 6.8%. After four quarterly price falls followed by two rises Scottish prices have regained the level they last achieved at the end of 2008. But the number of house purchase transactions is still around half the level recorded before the onset of recession.
All areas of the country continue to report annualised falls in prices ranging from -2% in Dundee to -12.1% in Glasgow.
Donald MacRae, chief economist at Lloyds Banking Group Scotland, says: “The Scottish economy entered recession in Q3 2008 and has since recorded five consecutive quarterly falls in output with a likely sixth yet to come.
“But the good news is that business surveys point to an end to the downturn early this year.”
