Repaying a mortgage into your 90s one option to fix arrears, says Central Bank

Deputy governor urges lenders to ‘think more imaginatively’ to resolve Celtic Tiger-era debt cases

Extending mortgage repayments for borrowers into their 80s or 90s is "one of a range of resolution options" for people deep in mortgage arrears who are in or nearing retirement, the Central Bank has said.

Ed Sibley, deputy governor of the Central Bank, urged lenders to “think more imaginatively” to come up with solutions for the “significant problem” of long-term mortgage arrears cases.

There are about 23,000 borrowers who have fallen behind on repaying some 29,000 mortgage for more than a year, including people in arrears for more than a decade.

The high numbers of people struggling to repay Celtic Tiger-era debt have led borrowers to use the State’s personal insolvency regime to secure court rulings involving large reductions in monthly mortgage repayments and payment extensions into their 90s to stay in their homes.

A Circuit Court judge finalised a ruling this week allowing an indebted 68-year-old Waterford handyman to remain in his home for 30 years on a reduced mortgage repayment of €93 a month for life because he was retiring and could not afford the remaining €97,000 on his mortgage.

The court overruled the challenge of the lender, Ulster Bank, which objected to the proposal which will involve the bank being repaid in full from the sale of the house after the man’s death.

‘Deep distress’

Speaking generally on solutions, Mr Sibley told The Irish Times that it was "not ideal" for people to be repaying mortgages into their 80s or 90s but that the Central Bank expected lenders to resolve mortgage cases in "deep distress" in a way that works for lenders and borrowers.

“This is one of a range of resolution options that could potentially help borrowers who are in or are approaching retirement age where they can afford the agreed repayment but not to fully repay the mortgage,” he said.

“The interest rate being charged would need to be low such that the cost of credit for the borrower is reasonable and that they would not be better off with an alternative restructure.”

Mr Sibley stressed the differences between groups of distressed borrowers and how there was no one solution for all the borrowers but that “different solutions for different types of problems” needed to be found “to try and address what is still a significant problem.”

“It is the hard yards working through different groups of distressed borrowers and their particular circumstances to try to find the best solution,” he said.

Some solutions would be found in agreements between lenders and borrowers, while other borrowers “in really deep trouble” would need help under the personal insolvency system or from improvements in the mortgage-to-rent scheme or more Government-backed solutions.

Changing legislation

The Central Bank is discussing with the Departments of Finance and Housing the possibility of changing legislation to make the mortgage-to-rent scheme - where a borrower switches from owning their home to renting it as a social housing tenant – available to more people.

Lenders are also being pushed to engage with about 90,000 borrowers facing a shortfall on their mortgage if their loan was restructured such as on an interest-only basis or if part of their mortgage was “warehoused” for repayment at a later date to make repayments more affordable.

“We are pushing lenders to go further than they have been doing, to go deeper into that waterfall of solutions and think more imaginatively about the solutions that they can offer,” said Mr Sibley.

One option he suggested was a reduction in the interest rate the distressed borrower was being charged given that some people are paying significantly more that the rates available to others.

The Department of Housing said this week’s court ruling reflected “the increasing level of innovation” in debt arrangements being negotiated through the personal insolvency regime.

The department said it would complete a review of the mortgage-to-rent scheme before year-end that would consider how the scheme can help people in long-term mortgage arrears.

Simon Carswell

Simon Carswell

Simon Carswell is The Irish Times’s Public Affairs Editor and former Washington correspondent