STANDING ON the steps of Government Buildings yesterday Minister for Finance Michael Noonan suggested there was something for everyone in the report from the Inter-Departmental Working Group on Mortgage Arrears. That is not quite true. It advances several proposals which will alleviate the personal debt crisis faced by many people with unsustainable mortgages and remove the threat of home repossessions and forced evictions for up to 10,000 homeowners.
But the measures will not help the many thousands of others who are confronting a lost decade of negative equity and mortgage debt which they can just about service but only at the expense of many other things on which the quality of their lives depend.
Apart from suggesting that fixing the bottom of the market will give everyone a lift, Mr Noonan had little by way of comfort for this squeezed middle. The Irish economy will not return to good health without a broader solution with more pragmatic engagement by banks and lending institutions. That is not to say the report is not welcome. It is a sign that the Government has finally realised that simply “kicking the can down the road” by imposing a moratorium on home repossessions is inadequate. There is a greater sense of urgency and the fast-tracking of a personal insolvency Bill – a crucial element of any attempt to get the country out of the financial quagmire it finds itself in – indicates that the Government understands the need to act swiftly.
The proposals that could help those not yet at the end of the road include the introduction of trade-down or negative equity mortgages; split mortgages and the sale of property in negative equity with lenders’ agreement.
These ideas would introduce a degree of flexibility which has heretofore been missing but will require the support of the banks as there is nothing in the report which compels them to engage with those to whom they, sometimes recklessly, lent money during boom years.
The Irish Banking Federation has welcomed the report – unsurprisingly, perhaps, as Mr Noonan made it very clear that they were not being asked to take an immediate financial hit. They will inevitably have to bear some of the burden of bad mortgages but the Minister said no fresh capital injection would be needed when the report was implemented. This line was picked up by the international financial wires, as Mr Noonan no doubt hoped, and reinforced the message that the Irish banking system was sound.
There is no suggestion of blanket debt forgiveness in the report and no recommendation on how to tackle negative equity. Nor does it have any proposals to resolve the crisis enveloping the buy-to-let market.
Many small-time investors cannot pay the mortgages either on their homes or on their investment properties because they bought the line, peddled by banks and by successive governments, that property investment was the fiscally responsible thing to do. This line was wrong and despite this report, it looks as if people will have to pay heavily for the foreseeable future for swallowing it.