McGrath calls on Central Bank to remove differences in split mortgage offers

McGrath calls on Central Bank to remove differences in split mortgage offers

Michael McGrath TD

Fianna Fáil spokesperson on finance Michael McGrath TD has said the Central Bank must intervene to remove the dramatic differences in the split mortgage offers being made by different banks to borrowers.

At present, a Bank of Ireland split mortgage customer will pay tens of thousands of euro more than an AIB customer for example.

Deputy McGrath commented: “The Keane report on mortgage arrears of September 2011 identified the split mortgage model as an important long term forbearance option. However, different banks are offering very different terms on their split mortgage offer. For example, AIB is not charging any interest on the warehoused portion of the mortgage whereas Bank of Ireland is charging full interest on it. I understand Permanent TSB is charging 1% interest on the warehoused mortgage.

“The dramatic difference for the customer is best illustrated by way of an example: Let’s take a distressed borrower with a mortgage of €200,000 who qualifies for a split mortgage with 50% of the mortgage being warehoused for a 10 year period. With AIB, no interest is charged on the warehoused €100,000. However, under the Bank of Ireland model, the borrower will clock up an interest bill of almost €57,000 on the warehoused principal sum of €100,000 (assuming an interest rate of 4.5%). Under the Permanent TSB model, the borrower will clock up an interest bill of €10,500 on the warehoused mortgage.

“In a recent Dáil reply to me, Finance Minister Michael Noonan acknowledged the split mortgage ‘product details vary from lender to lender’ but indicated no willingness to intervene. Both the government and the Central Bank have again taken a ‘hands off’ approach on this issue and have allowed the banks to set their own rules for the split mortgage solution.”

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