The Money Advice and Budgeting Service (MABS) have insisted that government plans to solve the mortgage crisis won’t work.
In a new report, MABS found that the typical struggling homeowner in arrears is older than many experts previously thought, casting doubt on the official split mortgage plan to tackle the crisis.
It found that the majority of the people in mortgage arrears are aged between 41 and 65.
Experts told The Irish Independent that this was a new and explosive revelation and contradicted perceived wisdom that most of those in arrears are in their 30s.
Regulators and the Department of Finance are hoping that most of the almost 100,000 distressed borrowers will be offered split mortgages.
This is where the mortgage is divided, with repayments made on the main part of the mortgage and the other part “parked” and dealt with later.
However, the new report on mortgage arrears casts doubts on whether or not this will work.
The report, commissioned by the Department of Social Protection, examines almost 6,000 mortgage arrears cases dealt with by MABS offices.
Most of those who go to MABS because of mortgage difficulties are at an age when they should be nearing the end of their mortgage. However, they topped up their home loans during the boom, which has left them deep in debt.
According to the report, solutions “such as debt warehousing/split mortgages will not provide relief to many MABS clients in mortgage difficulty.”
Instead, banks would be better off taking the mortgages and other debt together and writing down a portion of it to a level the borrower can afford to pay.
The report also found that it is taking banks two months to reply to distressed borrowers with offers to deal with the situation and MABS has called for the Central Bank to take action to deal with the delays.
Lenders are also criticised for offering arrangements to borrowers that they have no hope of meeting. This is because the repayments are set too high.
The banks are accused of offering solutions to those in arrears which focus on the mortgage debt only and ignore other borrowings.
The full report ‘MABS Clients and Mortgage Arrears’ by Collette Bennett, is due to be published in a few days.