Banks pull plug on Covid-19 mortgage breaks scheme

by Sylvia Pownall

The banks scheme offering payment breaks to borrowers struggling due to the Covid-19 pandemic will stop taking new applications from this Thursday.

As of September 30 mortgage ‘holidays’ will be dealt with on a case-by-case basis by lenders with reduced payments and interest-only payments on the table.

Finance Minister Paschal Donohoe said it is vital that banks work with borrowers to ensure suitable arrangements are put in place for the estimated 37,000 currently on payment breaks. 

“Lenders need to demonstrate a continued awareness of customers’ financial situations and to deal with cases in the most sensitive way possible,” he said. 

“It is in everyone’s interest that the number of people who cannot service their loans is minimised; a point I reiterate to the banks during our engagement.”

Sinn Fein’s finance spokesman Pearse Doherty had called for an extension of the scheme as “we’re not back into normal times”.

He said: “We still have over 200,000 people who are out of work and are on the pandemic unemployment payment, with that payment being cut last week.

“We have another 250,000 people whose employers are being supported through wage subsidy schemes, and many of those have suppressed wages.

“Many tens of thousands will not be able to pay, and that’s why we need to use the flexibility of the European banking authorities and allow for an extension, as has been done in Spain, Italy, Portugal, Germany.”

The latest report from the Central Bank shows a reduction of around 10% in the number of mortgage accounts in arrears from April to June – mainly due to the introduction of Covid-related payment breaks.

Figures show at the end of June there were 736,307 private residential mortgage accounts with 56,792 in some form of arrears. The Central Bank said that 41,061 accounts, or 5.6%, are in arrears of more than 90 days. 

Of the accounts in arrears, 9,591 or 17% are in arrears by between two and five years, while 11,936 accounts or 21% are overdue by between five and ten years and 8% or 4,701 accounts are in arrears of over ten years.

Some 87% of mortgages for principal dwelling homes are provided by banks while 13% come from non-bank entities. But of the properties in arrears of over 720 days, 44% are held by banks and 56% by the non-banks.  

A total of 77,789 accounts have had the terms of their mortgages restructured and 87% of these are “meeting the terms of their arrangement”. 

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