New mortgage-to-rent scheme

A new scheme that will turn holders of hopelessly distressed mortgages into renters has been unveiled by Minister of State for Housing Jan O'Sullivan.

The Mortgage to Rent scheme will allow families remain in their home, but they will have to relinquish ownership of the property.

The ownership of the house will be transferred to a housing agency financed by a 70 per cent loan from the original mortgage lender with the remainder coming from the State, which will take a 30 per cent equity stake in the house.

A pilot project begun earlier this year has already been availed of by 60 families throughout the country, a little over 20 of those from Dublin. There is an upper limit to the market value of the house - at €220,000 for the capital and €180,000 elsewhere.

Those who can avail of it are low-income families who otherwise would have qualified for social or local authority housing.

At the scheme's announcement this afternoon, Ms O'Sullivan said it will help over 100 families this year and could eventually be geared up to help several thousands. She and her officials emphasised the "humane" aspect of the scheme in that families do not have to leave their homes.

A budget of €4.5 million has been allocated this year with the prospect of larger budgets from next year.

Ms O'Sullivan accepted this would only help a small fraction of the estimated 100,000 households in mortgage arrears. She said it was one of the measures being introduced in the context of the wider personal insolvency legislation, which will be announced tomorrow.

Elsewhere, AIB revealed mortgage arrears at the bank continue to rise.

Speaking at the bank’s agm this morning, chairman David Hodgkinson said that when looked at on a value basis, the bank's mortgages in arrears of 90 days or more has jumped to 17 per cent in April, up from 15 per cent last December.

More than one-third of the buy-to-let mortgage portfolio is now in arrears, while 12 per cent of residential mortgages are - when looked at by value - up from 11 per cent at the end of 2011. When looked at on a numbers basis, 7.7 per cent of mortgages are now in arrears, up from 6.9 per cent at the end of 2011.

Mr Hodgkinson said the bank is “aggressively targeting measures aimed at reducing the group’s overall cost base”, as part of its restructuring programme, which is designed to “prevent a repeat of the disastrous and far reaching issues of recent years”.

This cost-cutting programme includes a redundancy programme of 2,500 employees, as well as reductions in salaries and the removal of legacy benefits across the organisation.

Ahead of the agm, there was a small protest outside, following an announcement from the Irish Bank Officials' Association that staff were “virtually unanimous” in rejecting the cuts, with the majority willing to participate in litigation to stop their implementation.