The position on here remains skeptical about the ability of our banks to deal with our own mortgage crisis where one in four mortgages is in some form of difficulty. There is a target whereby 20% of distressed mortgages are to have resolution plans by the end of June 2013, but that equates to 25,000 mortgages out of the 125,000-odd buy to let and owner occupier mortgages in arrears at the end of December 2013. The disgrace is that we’ve known about the crisis for over two years, with the Keane report initiated in August 2011 and President Clinton acknowledging mortgage debt as the number one economic challenge facing the country, something accepted by An Taoiseach.
Ireland is not the only country in which there is a mortgage crisis.
Greece has put together proposals which are being sent to the ECB now, and which are expected to come before the Greek parliament before the end of May 2013. The Greek original is here and there is a pigeon translation here. You will recognize many of the elements of the scheme!
(1) You have net household income of €25,000 or less (for large families or where there is disability, the limit rises to €30,000)
(2) And your household income has declined by at least 20% since January 2010
(3) Mortgage and other lending of less than €180,000, mortgage lending of less than €150,000
(4) The value of the property is less than €250,000
(5) Total cash deposits are less than €10,000
(1) You get a 48-week, that is, 4-year “umbrella” period
(2) Repayment of debt is limited to 30% of your net monthly income
(3) After the 4-year umbrella, repayments kick back in on the original terms
There are two additional measures
(1) If income is less than €15,000 then the interest rate during the 4-year period is capped at 0.75% over the ECB rate, or 1.5% at present
(2) If you are unemployed then you get an interest holiday during the first 6 months of the 4-year period
The ECB needs to be involved because these measures which are expected to apply to 200,000 households will have a negative impact on the banks, with both reductions in revenues and losses. There is no published estimate of these impacts.
These proposals may be shot down by the ECB, but it demonstrates the Greek government is at least trying to progress solutions, even if they have an impact on the banks. Let’s see how we get on in Ireland at the end of June 2013.