DISTRESSED BORROWERS URGED TO CONTACT LENDER - Figures released by the Central Bank this week showed that by the end of September, 5.1% of the country's mortgage accounts were in arrears by 90 days, and 3.6% by over 180 days. That means that out of 789,000 mortgages, over 40,000 are behind in their payments by more than 90 days. Formal court proceedings issued by mortgage providers against mortgage holders increased by 23.5% between April and June.
John P Bourke worked with the TSB Group in Britain in the 1980s and 1990s when the UK suffered a substantial property crash. He also has lots of experience of the Irish homeloan market as chairman of Irish Permanent.
Mr Bourke says the UK suffered a huge property crash in the early 90s when a million households owed more than their houses were worth while another million owned a house in which the debt equalled the value of the property. He says the scale then is similar to the Irish mortgage arrears crisis now. He says the UK banks slowly got their act together, took on extra staff and worked to ensure that as many people as possible managed to stay in their own homes. He says that the TSB Group cuts tens of thousands of deal with borrowers, which saw some of them pay nothing on their mortgage for a while, others pay half the amount or a third or some other such arrangement. He says the bank did not want thousands of repossessed houses on their hands which they then had to sell on.
But he says there are some differences with the Irish situation now and the UK situation then. UK rates in the 90s were over 10%, while rates in Ireland are at record lows despite the recent increases. He also says that the UK banks did have money despite the losses on their mortgage books and did not have the same funding problems as the Irish banks are now experiencing. He says the UK banks were able to continue to offer new mortgages, and said this stream of new borrowing was vital to fill the gap.
While he acknowledges the stress homeowners find themselves in when they can't repay their mortgages, he says the best thing to do is to talk to the lender to organise some sort of arrangement. He says that things did improve in the UK after three or four years and the same will happen in Ireland. He denies that negative equity is a problem and advises people to stay in their homes - paying as much as they can - and house prices will slowly start to improve.
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MORNING BRIEFS - Pressure is mounting to do away with Ireland's low rate of corporation tax as finance ministers in Austria and France say it may have to be raised as part of any Commission, ECB/IMF deal. It has emerged as a major point of contention with the negotiators in Dublin since yesterday. Ministers here though say it is 'non-negotiable' and is crucial for foreign investment, as the country discusses an aid package worth tens of billions of euro for the banks.
*** While details of the bail-out available to Ireland may not be known for a few days, the Financial Times warns that it must not repeat previous mistakes. It says measures like the National Asset Management Agency and other 'bold policies' have not worked. NAMA was set up too slowly, and the discounts applied to the assets being transferred weren't pessimistic enough. As it warns that its an absence of liquid funding, not weak capital that destroys a bank, the newspaper manages, again, to get the words 'sheebeen' and 'bog' into the first sentence of one of today's LEX pieces - while saying that the liquidity and capital assistance that Dublin is exploring with the EU and IMF could work if used properly.
*** Finance Minister Brian Lenihan said the Government was extending an unlimited guarantee for depositors until the end of next year, six months longer than previously announced.
*** Spain and Portugal say their fiscal problems can be solved without a rescue package. Spain's prime minister said yesterday that the government is fully committed to cutting its budget deficit and reforming its pension system. And Portugal's finance minister said it will finance its debt in the market and had no intention of asking for help.
*** House builder McInerney Holdings says in a statement this morning that it is cancelling its stock market listing in Dublin and London, saying it is no longer in best interests of company or its shareholders for it to maintain its listings.
*** On the currency markets, the euro is trading at $1.3670 cents, and 85 pence sterling.
