Sinn Féin has published draft legislation which if enacted would force banks to cover the cost of mortgage payment breaks given to customers suffering financially due to the Covid-19 crisis.

Around 140,000 borrowers have sought and received payment breaks for their loans since lenders introduced the option three months ago, with 78,000 of those given on mortgages.

But Sinn Féin has repeatedly criticised the structure of the scheme, because it involves borrowers eventually having to pay the interest on the missed repayments, either through increased repayments over the remaining lifetime of the loan or via an extension to the term.

It says that over the lifetime of a typical €200,000 30-year home loan, this could see the borrower having to pay back an extra €2,500 above what they had initially expected.

The party's finance spokesman Pearse Doherty said he has previously asked the Government to take action to prevent this accrual of interest for those availing of payment breaks.

But he said he has been told by the Government and the banking industry that it cannot be done without breaking European Banking Authority guidelines around the classification of non-performing loans. 

The Minister for Finance has said changes to interest charging can, under these rules, result in forbearance implications and in loans becoming classified as in default, with consequences for both consumers and banks. 

But Mr Doherty said that governments across EU member states have passed legislation to ensure that the cost of mortgage breaks is borne by the creditor, not the consumer. 

He said a total of 20 countries have implemented payment breaks through national legislation, rather than industry-wide initiatives such as that taken in Ireland and eleven other countries.
In 18 states the cost of the break is borne by consumers. But in 12 other states, like Spain for example, the cost of the break is covered by the bank not the consumer, Mr Doherty said.

In seven member states the cost of the break is borne by a combination of bank and consumer. In Belgium, for example, this means that a mortgage break sought and received by someone on low income will see no interest accrue from the scheme, he claimed.

In one EU country the cost is being met by its Government.

In member states where the cost is met by a combination of measures, the EU has included that country in more than one category, leading to a total greater than the 27 EU member states.
Today Mr Doherty published a heads of Bill on the issue and will submit it to the Department of Finance. 

If enacted it would ensure that during the period of the payment break, no interest would accrue on the amount owed to the lender. 

Lenders would also not be allowed to increase the amount due in mortgage repayments following the end of the moratorium for the remainder of the mortgage term. 

However, the lender could increase the term of the mortgage in proportion to the term of the moratorium applied for and granted so long as the amount repayable is calculated in accordance with the terms and conditions of the mortgage agreement on the date of the application.