€827 million in arrears: Should there be debt forgiveness?

€827 million in arrears: Should there be debt forgiveness?

Should there be debt forgiveness?New figures released by the Central Bank show that a total of 86,271 borrowers are struggling to pay their mortgage, 49,609 of which are in arrears for more than 90 days at the end of March, up from 5.7% at end of December. These mortgages total €9.6 billion, with €827 million in arrears.

Commenting on the figures Bernard Sheridan, director of consumer protection at the Central Bank, said, “Households should not struggle to deal with their mortgage payments or arrears on their own. Mortgage lenders must work with their customers to help them through their difficulties and, where appropriate, agree a manageable and sustainable solution”.

However Managing director of Select Finance Group, Trevor Grant, said the figures were very worrying and extremely disconcerting as “these homeowners are currently on relatively low interest rates which are only set to rise”. There is much concern about inflation and the certainty of future rate increases that will no doubt tip more householders into the arrears bracket and in turn increase our debt. “Whether the solution is called debt forgiveness or debt restructure, it will ultimately have to happen as the vast majority of these people will never be able to repay these mortgages,” added Ciarán Phelan, chief executive of the Irish Brokers’ Association.

Have Your Say: 86,271 borrowers struggle to pay their mortgage

  • How can those in mortgage debt be supported without punishing those who were prudent?
  • Is debt forgiveness the solution?
There are 33 comments for this article
  1. Rob at 10:00 am

    Whatever the result of greediness or stupidity nothing should be forgiven!!!
    as…
    1) Nothing else in life is forgiven (e.g. bad purchases / shares on the stock market…), why refunds or write-off should apply here!
    2) In principle Bank could write-off whatever they like — but with their shareholders private funds! NOT with tax payers money!!!
    3) Refunds or write-off are not fare to the rest of us that are up to speed with the monthly repayments
    It’s a tough life 😉

  2. Marie at 2:44 pm

    A young couple on my road bought their house in 2008. She lost her job and they can no longer afford to pay their mortgage, both moved back with their parents and now rent their house out to someone that gets rent suppliment of €800 a month. Where the justice the goverment helping someone else to live in their house!! So yes, u are paying already!!

  3. Gumbo at 9:33 am

    I think the only realistic solution is equity for debt. At the moment Peter (government) is paying Paul (banks) whith little or no prospect of a return. Why not let Peter pay me on the condition that I must then pay Paul?? Me and Paul are better off for the same cost!!
    For example; The government (or bank) buys say 25% of my remaining €400k mortgage (even though the house may be worth €300k) and they own 25% of my house. This money must be repaid directly to the bank. Therefore the bank’s balance sheet improves and my monthly mortgage repayment is lower (based on the remaining 300k mortgage). I can now keep my house and have some more spare cash which will hopefully trickle into the economy. If i want to move or rent out the house then the government/bank must agree. If I sell the house in 10 years time then hopefully the value will have increased and the bank makes a gain on their 25%.
    I think that people would only give up a percentage of their house if they really have to and therefore i can’t see this been abused. I also think this would help determine a floor in property prices and give a boost of confidence to people, all for the cost of a couple of billion….which we are going to gove to the banks anyway.

    This seems almost too simple – what am i missing?

  4. Duilleog at 8:58 pm

    I think outright debt forgivness is not the answer. I was offered a mortgage of 9 times my salary in 2006.
    I am a single parent and thought at the time the bank was mental to give out so much money to one (decent) wage earner. I turned the mortgage down and went down the affordable housing route. This too did not work out for me as the properties were all apartments with ridiculous management fees. I am in my 30s and have been living with my parents for the last few years saving to try to buy a home.
    I am now in the position were I have a large cash deposit and the very modest houses (60sq m) that were selling at the peak for €450,000 are now half the price and finally in my comfort range.

    Why should I pay for someone elses mortgage when I was prudent about buying a home for myself and my child??

    Surely there is some kind of compromise that can be reached where people keep the homes they have worked hard for while people like me and the other people who are paying their mortgage are not penalised. What about 99 year mortgages on houses and apartments with 2 or more bedrooms? What about house swaps from large homes to smaller houses and apartments?
    If debt forgiveness is the only way I think only the original house purchase price and the original mortgage granted for the house should be included, remortgages and equity release should not be included and every penny of that should be paid back.

  5. Caroline at 12:26 pm

    In 2007 I purchased a house. I believe I was prudent in that I invested 100,000 in the property and my mortgage covered the balance which was 320,000. The mortgage was given to me based on my salary and mortgage tax credits. As I am not a gambler I decided to opt for a fixed rate mortgage.

    Then less than 2 years later brutal salary cuts were imposed and mortgage tax credits abolished. The property is now worth less than half of what I paid for it. I didn’t benefit from the low interest rates because being prudent, I had gone for a fixed rate. Yes, I believe that I am responsible for a part of this situaion but I not totally responsible for it. The aspect of wage cuts, abolishment of mortgage tax credits and property collapse is not of my making and therefore I do not believe that I should have to take the entire burden of this situation. That is what is expected of the mortgage holder in the current situaion.

    I was not speculating and buying shares in some Nigeran oil well. I have worked since my early teens and I bought a house in which to live. I am now entering the last decade of my working life with the possiblity of losing my home. I am not asking for anything other than some level of equity – is that asking too much???

  6. What you don’t know, won’t hurt you at 1:19 am

    I laugh at the ignorance of the people who think debt forgiveness means writing off mortgage debt. Are you really that stupid that you think that all you have to do is spend your money

    I am also disgusted at the the attitude of some people who adopt the attitude of I’m OK f**k anybody who is in difficulty, and I do sincerely hope that some day you find yourselves in a similar position, with lots of personal debt and/or a cut in your wages or even loosing your job.

    Debt forgiveness is not about writing off somebody’s debt because they have spent the mortgage money on a holiday in the sun. Debt forgiveness is about helping people who are trying to make the payments and are genuinely struggling to do so. What some of these allegedly debt-free idiots who post here don’t realise that their future is as much dependant on how the current level of debt is dealt with. If the 400,000 or so people in this country who are currently at risk of defaulting on their loans actually defaulted then the economic impact will be huge, another 120,000 houses on the market, perhaphs upwards of 700,000 in difficulty (if you include depandants), none of them able to spend money or get credit to spend and dependant on social welfare.

    If you want to see what will happen, study the german economy collapse of 1929 when the german people, robbed of their wealth, and robbed of a means of production of wealth, and at the same time forced into making full and complete economic reparations to the allies for the costs incurred by the allies during WW1.

    The result was that they defaulted on their loans and the great depression began. How ironic is it that germany is now inflicting this on Ireland, Greece and Portugal.

    So unless you are a civil servant in the privileged position of knowing you’ll never loose our job or have to take a pay cut, think very carefully about what you want to happen, because as the saying goes, be careful about what you ask for, you may get it.

    @Ja, you don’t want to give your money away to bail out poor decision makers, sorry mate, you already have, it happened when finnia failure bailed out the fat cat bankers. Ireland could have easily sorted out its own economic problems if finnia failure hadn’t sold off the family silver to bail out the french and german banks who recklessly loaned money to Irish banks.

    Oh, and by the way, al you smart arses who think you were sensible, not buying anything and saving money instead, you are the source of Irelands current problem. Due to the process of fractional reserve banking, each €100 you save, becomes about €360 of debt for other people.

  7. jean at 9:12 pm

    the banks did go to people offering them money. i was phoned by my bank to say that i ahd been approved for a loan in the tens of thousands that i had neither applied or asked for

  8. ray at 3:53 am

    No I dont think there should be…… People living like Kings and Queens in the good times and borrowing like they were should not be allowed Debt forgiveness pay back what ye borrowed and then there be no problem…. I’m not a banker but you would not have been given your mortgage but for your bank statements!So hand back your keys if your needs now must….. and shut up

  9. Miss at 1:51 am

    Not everyone was greedy when they bought a house during the boom. Most people wanted to own their own property and paid what the going rate was at the time. They had a fear that if they didn’t buy then they would be priced out of the market a year later. No one could predict the future. However, that doesn’t mean they should be forgiven. If you may a mistake you should pay the price (literally)

  10. jmcc at 8:08 pm

    God…. the replys are so sad. it makes me want to get out this shity little country, My problem.. Im 75 years old. The nursing home wants my money as do the revenue people. God help the young ones who are in trouble, because the government wont and the banks are shameless.

  11. Laurie at 7:00 pm

    I am looking to move back to my country of birth after 55 years away. I look at property prices in Ireland and should feel pleased, but I don’t. I view houses on the internet offered for sale “With entire contents” and see babys cots in rooms, toys lying about a house and this fills me with great sadness. These places were homes occupied by thriving, loving famalies and now, because of the politicians and bankers they are just bricks and mortar with minimal value. Do not blame people for being greedy for trying to improvee the lot of their family, any decent parents would strive to do the same. There must be a third way and freezing repayments of mortgages without penealty might be a start. There are many greedy speculators who quaffed champagne in the good times, to hell with them now, they can take their chance. Bankers talk in billions, honest ordinary people talk in hundreds or thousands. The difference between the two must be bridged and the banks accept the responsibility for the situation.

  12. Lynda at 6:54 pm

    While we have the usual “I was prudent”, “why should I…” “I work longer for less” comments, there is a misconception that all of the people struggling to pay their mortgage payments are those that bought in the boom years. They are not. On top of that, they are not all in negative equity. Also, not everyone is able to stretch their mortgage term as not everyone is 21 years old and not all of us have children to pass the mortgage on to.

    This situation is a crisis and not everyone fits into that “you bought something for E2 million, tough” criteria that appears to be rearing its ugly head across the internet. Let’s stop the generalisations please.

    There are people truly struggling who have lost their jobs through no fault of their own. They don’t even have the “little left at the end of the month” and the complaint of having to work longer hours and pay more tax. They simply have nothing.

    Every story is different.

    @Daniel if you lost your job, you can apply for rent supplement. A mortgage holder who loses his job can apply for mortgage supplement “short-term” (ie 12 months) if he’s lucky to squeeze into the tiny criteria. Very few are.
    @Ja: Either way you will have to pay as if someone loses their home due to repossession, you will have to pay by way of rent supplements.

    I believe this is the tip of the iceberg of people in arrears compared to those I know “about to go into arrears”. I know many, many people on the edge, some working, some out of work. And most didn’t buy “in the boom” before you jump on the “tough for them, learn a lesson” line.

    We haven’t seen anything yet.

  13. TCM at 6:46 pm

    NEVER, NEVER, NEVER.

  14. Jim at 6:02 pm

    I think that some form of re-scheduling of the massive debts people have in respect of mortgages is going to be unavoidable ! I would like to suggest the following to be applied to all mortgage holders that wish to avail of it.

    Take a base starting point of 1st January 2008 as the reference point at which all Mortgages outstanding are valued, whatever is outstanding at this point. Then reduce that amount by the per centage fall in house prices to the 1st Jnuary 2011. The balance should have to be paid in full at the variable rate now applying or in the future.

    The amount by which the mortgage has been reduced should be put on a long term loan basis of 40/50 years at the exact same inter bank rate that the ECB is lending to our banks, no profit margin , no administration fees. This would ease the burden on those who wish to avail of it, including those on tracker mortgages which the banks are so keen to get rid of.

    I think that this sharing of the burden by Lender and Borrower without recourse to the blood drained taxpayer, would be equitable and sustainable.

    Jim

  15. Carol Hill at 5:37 pm

    I don’t agree wiping out peoples debts as many have said it is there own responsability if they lived beyond there means, however when somebody has sustained there mortgage and other loans for 10 years or more when they were working and never missed a payment with A1 credit ratings then they are forced to leave there family home and work abroad as there is no work in Ireland the case must be looked at differently.I do think the banks have been reasonable to work out solutions with people. When you can’t sell, don’t have a job you can not possibly pay what you had been before the crash, also it’s fine to pass the debt onto family if you have some…..what if you don’t!!

  16. Frank Bodley Bodley Financial Services at 4:39 pm

    Arrears should be capitalized. Private Residences should be taken into ownership by the Banks and properties rented back to the Tenant at an affordable rent according to their means increasing as the tenant/household earns more money by getting back into the workforce and earning a living

  17. brian keenan at 4:15 pm

    yes there should be forgivness

  18. Ja at 3:29 pm

    @ #10 Daniel I agree 100% with your assessment
    @ #11 Simon I disagree 100% with yours
    The banks did not come to people looking to give them money. They went to the banks. They chose their actions and they are responsible. I have saved and may now purchase a house at something approximating its actual value. I don’t want to give my savings away to bail out poor decision makers. What lesson will they have learned?

  19. Billy Bruce at 3:21 pm

    Yes, we the taxpayers are paying for the banks total cavalier attitude to lending. I personally am 700-800 euro a month worse off because of wage cuts and levies. But I wasn’t cavalier with my purchases. Because I bought modestly, I can still afford to pay my mortgage. So why should I take a further drop in wages or pay more taxes or both to pay even more debt I am not responsible for. Because if that happens then I could be in trouble. Yes, find a way to help them to solve their debts, but don’t wipe it out. I know plenty of young (and not so young) people who had to have 4 and 5 bedroom large detached houses instead of starting off small or medium. Those of us who were sensible should not have to pay for those who were not. You borrowed it, you find a way to pay it!!!

  20. PaulFlexBrowne at 3:12 pm

    Nobody has mentioned County and City Council loans yet……..if the banks start ‘forgiving’, will the state itself? Interesting…….

  21. Mitch at 2:41 pm

    It’s not that i don’t feel for people who may be struggling at present – in some manner we all are! Even those who have work are in some form taxed to the hilt – with more taxing proposals being introduced such as property etc… but if debts are to be firgiven where is the line to be drawn and where is the money to cover the losses to be found???

    I was raised with my mother bleating in my ear ‘that if i burnt my A*** i’d have to sit on the blister’ therefore when i bought i did so within my budget!!! the fact that i am now in negative equity by over a 1/3 of what i paid for it is my loss, and what i have to ‘sit on’ but luckily i still have a roof over my head which at present i can still afford…..

    I believe that the best and only solution is as stated above ‘The bank extends their mortgage over a longer period of time – 40/50 years. The children will inherit the debt but at least their existing lifestyle will not be affected by being homeless’ – it makes perfect sense to me….

  22. John DeClerk at 2:31 pm

    I would be very sceptical of outright Debt forgiveness as it would probably mean punishing people who were prudent and did not jump on the property band wagon, bailing out those who did. What should be done is the setting up of an independent arbitrary service to work with the banks and the Mortgage holders to come up with a fair solution.
    I think there are a number of options , including extending the term of the mortgage, going to interest only, and perhaps technical repossession of the a person home but they would pay the market rent to bank so they can stay in their home. An option could be put in place for the people to buy back there home a later date.
    I think there is a populist and Media hysteria about the issue of repossessions. The actual number are very low relative to the number of arrears. I don’t see a massive number of foreclosures as it not in Banks best interest for this to happen as they would end up having to write off large amount on Mortgage book due to the slump in property prices. I expect that bank are willing to work with mortgage holders to find a solution as both parties lose in foreclosure cases.

  23. Simon at 2:04 pm

    It’s fine people saying I wasn’t stupid enough to take out a loan I couldn’t afford so they should suck it up etc. however look at the alternative, thousands of families facing repossession, We are now paying for the mistakes of faceless bondholders and bankers but as a people we are adamant that we won’t help out people in our own community.

  24. Daniel at 1:43 pm

    I wonder whos going to forgive my car loan, rent… just because I wasn’t stupid enough to pay half a million for two bedroom apartment on 30k salary…

    Property purchase is an investment with risk associated with it. If one bought shares of company which went under, should this be forgiven??

  25. Stan at 1:32 pm

    Those unable to pay their mortgages should be allowed to simply hand back the keys and have the debt written off. The lending institution can then flog the properties for whatever they can get.

    The benefit of this solution is twofold. Firstly, by losing their homes, those that overstretched themselves will learn a valuable lesson in living within their means. Secondly, by taking a massive hit, the banks will ensure that they never lend in such an irresponsible manner again. Both parties were to blame and it is only fair that both should take the consequences.

    If you start rewarding people for their folly, e.g. by reducing the original loans, then who is ever going to practice prudence going forward?

  26. C-Anne at 1:29 pm

    I feel for these people, I really do. However, I may sound like a hypocrite but I do not think their debt should be forgiven. Me, us, we as tax payers who are somehow meant to be grateful for our jobs are being bleed dry. Not only are some of us constantly reminded in work that we are lucky to have a job and therefore expected to work 15 hours a day and receive no gratuity or time in liey for our overtime. We are now expected to foot the bill for the bank debts & now home owners. In addition to this there are two many people out there always willing and able to take advantage of the government subsidies. As the old saying goes, ‘cut your cloth to suit your measure’! I don’t go out anymore, I am incredibly fruggle and constantly looking for the best value for money because otherwise I won’t be able to pay my mortgage. There are some genuine cases out there that need help and there are some great alternatives on helping them such as;-
    1. The bank extends their mortgage over a longer period of time – 40/50 years. The children will inherit the debt but at least their existing lifestyle will not be affected by being homeless.
    2. The bank purchases a % of the house from the owner. This then reduces the debt owed by the individual. There should also be the option to extend the mortgage repayments over a longer period of time in specific instances.
    3. The bank reviews the persons personal financial circumstances and comes to an arrangement on exactly how much that person can afford. this arrangement stays in place until they are back up on their feet.

    These are only some of the alternatives. They may still end up costing the tax payer money but at least it will not be the ‘people lucky enought to have a job’ footing 100% of the bill again for something that is outside of our control.

  27. Glenn gannon at 1:27 pm

    If we as a nation have to foot the bill for the foolishness and irresponsibility of the bankers /and fincial advisers not to mention the corrupt activities of some major politicians then debt forgivness to desperate home oweners should be implemented as soon as is possible before one more bankrupt citizen takes their own life the sucide rate in this country which was already alarmingly high pre recession has dramatically increased due without any doubt to the financial pressure the banks and lending agencies are exerting on to these unfortunate people who through no fault of their own are Drowing in debt. Glenn Gannon Author/playwright.

  28. Mattie at 1:19 pm

    Debt Forgiveness? Absolutely… bring it on! I can afford to pay no problem… but then just like my neighbour, I’ll stop paying too! Sounds great.

  29. David Hannon at 1:08 pm

    Fact – The Banks gave multiple mortgages to Clients which were accepted in good faith by both parites.

    Fact – Due to unforseen economic circumstances the Banks are no longer able to carry the debt as are millions of bank clients in the form of mortgage holders!

    Fact – The EU bailed out the Banks with massive loans from the EU; the loans are now being payed by the taxpayers in Ireland; by default the banks are now the property of the taxpayers

    Solution – Any Taxpayer paying one penny to the government in tax that goes to the Banks either directly from the Irish Government or indirectly through the EU has a say in the operation of the banks, one assumes that the stakeholder is not going to have the bank forclose on their mortgage so either the client keeps their house and the EU covers the mortgage until the client is able to afford it (this can be means tested) or the client stops paying tax to allow payment of the mortgage or sells it’s stake in the Banks to cover the mortgage!!!!!!

    other Solution – REVOLUTION!!!!!!!!!! take you’re pick!!!!!!

  30. Lorraine Lawless at 1:07 pm

    I have been trying to move house for over a year now and having jumped through hoops for the banks, I still cannot get the mortgage that I need even though we have clearly proven that we can easily afford any increase in our repayments. So I feel that I am being punished for other people’s mistakes. I could have moved house during the boom when the banks were throwing money at people but I knew that the house prices were ridiculous and that my repayments would be huge so I didn’t move. People have to take responsibility for their own mistakes and stop blaming the banks. The banks screwed up big time but these people who got in way over their heads did so by their own volition. Every piece of documentation that you get from the bank clearly states if you cannot keep up repayments, your home could be at risk. I wouldn’t want to see anyone thrown out of their home but at the same time, why should the rest of us have to stay living where we don’t like so that these people can keep living in the houses that they couldn’t afford in the first place?

  31. Alec at 1:07 pm

    sorry but at the end of if you were stupid enough to take a 100 % mortgage and lie about your wage to get it ( which a hell of alot of people did cause they were greedy and wanted a bigger house in some location.) then tough. I didnt buy in the celtic tiger because i couldnt afford it, plain and simple. I am not bailing out any more stupid gobs****s anymore. Because if anymore taxes are brought in then i will also be in arrears and I can tell you now i will be looking for the exact same. Basically people were stupid enough to get into so much debt they can suck it up.
    this time maybe they might actually hit the people that got us into this mess. hit the white collars.

  32. Louise at 1:05 pm

    Its shouldn’t be about whether people were prudent or not. The majority of people who are struggling with repayments people who have lost their jobs through no fault of their own. Banks and investors were not prudent. They have been helped out

  33. Chris McCabe at 1:04 pm

    I don’t believe debt forgiveness is the solution. While there are many people struggling to pay their mortgages, why should those who didn’t expose themselves to such high depbts pay for the solution. Fully accept that the Government, Banks and society as a whole encouraged people to get on the property ladder, but nobody was forced to taking on these excessive mortgages. I believe these individuals simply lost their moral compasses.

    The US system of handing back the keys, isn’t really a runner for Ireland as the Bank’s simply don’t have the capital to absorb the debt.

    Perhaps the only solution is to extend the repayment terms and thus reducing the repayments. While this may indeed result in the transfer of debt to other people within the same family, I believe it to be the fairest option.

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