FINE GAEL in government would increase mortgage interest relief for the “negative equity generation” to allow savings of up to €166 per month, finance spokesman Michael Noonan said at the launch of his party’s banking strategy yesterday.
Measures to support those who find themselves in mortgage difficulties include increasing mortgage interest relief to 30 per cent for first-time buyers in 2004-2008 (from the current sliding scale of 20 to 25 per cent depending on the year the mortgage was taken out), financed in part by bringing forward the abolition of relief for new buyers from June 2011.
Fine Gael would cap the interest charged by lenders benefiting from the mortgage interest supplement scheme at the European Central Bank base rate plus 1 per cent, or the contracted mortgage rate, whichever is lower.
“We will legislate, if necessary, to stop mortgage lenders charging penalty interest rates (or forcing families to give up their low-cost tracker mortgage rates) on mortgages that have been rescheduled (ie the payment term lengthened) where the borrower has co-operated with the lender in agreeing a new, sustainable repayment plan,” the document continues.
“This policy document, which is quite extensive, is geared to restore a banking system in Ireland which functions, which works and which in particular works for ordinary people with mortgages and people in business in Ireland.
“On the mortgage side we have a number of proposals, and of course every individual proposal here is underpinned by a policy which will restore functioning banking once more,” Mr Noonan said.
The document, entitled “Credit Where Credit Is Due” also proposed the introduction of a universal mortgage indemnity insurance (negative equity insurance) which would be compulsory for all new borrowers with a loan-to-value ratio in excess of certain levels.
Mortgage lenders would be required to offer distressed homeowners a deferred interest scheme that enables borrowers who can pay at least 66 per cent of their mortgage interest (but less than the full interest) to defer payment of the unpaid interest for up to five years.
Fine Gael in government would amend pensions legislation to allow defined contribution pension savers to access funds early, subject to reasonable limits, to meet their current business and personal responsibilities (while taxing the draw-downs).
“We will work with the Financial Regulator and the industry to facilitate trading down and ‘negative equity mortgages’ by borrowers in this situation,” the document adds.
In addition, Fine Gael’s new universal mortgage indemnity insurance would provide for “adequate security for prudent lenders and borrowers against future risks of negative equity”.
In the event that a family was forced to sell their home due to adverse economic circumstances, any difference between the loan value and sale proceeds would be paid for by the insurance scheme.
“The insurance will be paid for by the bank and will be compulsory for all new borrowers with a loan-to-value ratio in excess of certain levels that will be decided in consultation with the regulator and the industry.
“The insurance will be privately provided but tightly regulated to ensure transparency and accountability,” the document states.
Other proposals: Fine Gael banking strategy
- Cutting bank costs to avoid consumer interest rate hikes
- Ensuring fraudulent bankers face the law
- Shutting down Anglo and INBS before the end of the year
- Halting future asset transfers to Nama from Bank of Ireland, AIB and EBS
- Making bondholders share the burden of the debts of insolvent financial institutions
- Introducing a partial loan guarantee scheme for small and medium businesses
- Supporting the sale of AIB and the EBS
- Diversifying sources of funding for our financial system to avoid being wholly dependent on money from ECB
- Shrinking the size of the bank loan books so that they are largely financed by domestic deposits