IBA: Mortgage debt a 'financial time-bomb'
The worsening situation in relation to people in trouble with mortgage repayments was a ‘financial timebomb’ which would go off unless action was taken to help hard-pressed homeowners, according to Ciaran Phelan, chief executive of the Irish Brokers Association (IBA).
The crisis was due to the fact that one-in-10 homeowners were now struggling with repayments, figures from the Central Bank showed. The level of arrears was continuing to spiral, he said.
There was a growing need for the next Government to devise a comprehensive solution as the current policy of forbearance although welcome was simply deferring and exacerbating the problem, he said.
According to Mr Phelan, IBA members needed to be able to offer their clients clear financial advice but with uncertainty over the changes that needed to be made to our debt laws and inconsistency as to how lenders would respond to proposals from homeowners, it was difficult to advise.
The incoming Government would need to deal with the issue as unless it did “this financial time-bomb will almost certainly implode” during its term in office, he said.
The figures from the Central Bank show that almost 60,000 homeowners — who are struggling to make repayments — have made rescheduled payment deals with their lender.
However, some 35,000 of these have been unable to keep to the new arrangements.
In 40% of all cases which have run into trouble, lenders are allowing borrowers repay the interest for the moment.
In the last three months of 2010, banks and building societies repossessed 106 homes, compared to 81 in same period in the previous year.
Also today it was learned that just 28,000 mortgages were issued last year — a drop of 43% on the previous year.
Frank Conway, director of the Irish Mortgage Corporation, said that since the fourth quarter of 2005 there had been a 90% drop in loan activity.
