The European Banking Authority has announced a three month extension for payment breaks on bank loans and mortgages.
This extends the period for availing of a payment break to 30 September. It does not change the duration of the potential six month payment break.
In a statement, the EBA said this was in response to "the extraordinary nature of the current situation". It goes on to note that it is highly aware that there is a trade-off in making this extension and "solvency issues" may develop which "need to be properly assessed by banks on a case-by-case basis".
The chief executive of the Banking & Payments Federation Ireland (BPFI) Brian Hayes welcomed the move but said he expected the demand for payment breaks to decline in the weeks ahead.
In a statement, the BPFI said demand for payment breaks on mortgages is now just 3% of what it was at the peak of the Covid-19 crisis.
A statement from the Central Bank also welcomed the application extension and further stated it expected lenders to take a consumer-focused approach when applying payment breaks and to protect their customers' best interests.
The bank said it had no concerns regarding any financial risk implications of today's decision.
In its Financial Stability Review published earlier this week, the Central Bank detailed that at the end of May, 192,985 payment breaks were active across the five main domestic retail banks relating to loans totaling €24.9bn.
This included 74,900 payment breaks on mortgages which accounted for 10.8% of the banks' Irish mortgage portfolios.
Sinn Féin yesterday 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.