Mr. Brendan O'Connor:

On split mortgages, we do not consider them for negative equity so it is for customers who are in arrears. They are assessed on the basis of affordability. As Mr. Duffy mentioned earlier, we consider somebody's net income and then we adjust it for reasonable living expenses in order to come up with a net disposable income. Our reasonable living expenses are approximately 20% higher than those of the ISI. We do not assess in terms of negative equity, it is done purely on the basis of affordability. We start with the most simple or standard forbearance products. To the extent that capitalisation, a term extension, etc., might resolve the issue, one never gets to a split mortgage. We determine that somebody qualifies for a split if he or she does not meet those options in terms of capitalisation or term extension. One of our criteria relates to whether a customer can afford to pay 80% of the open-market value of the property in a mortgage, regardless of the size of the mortgage he or she currently holds. If, therefore, somebody has a property on which the debt is €500,000 and which is worth €200,000 on the open market at present, we assess his or her ability to pay a mortgage of €160,000. That is what we assess it on.

We do not offer a split mortgage per se. A split mortgage is part of the waterfall where one goes through the other solutions and one sees if it is affordable. We estimate - at this stage it is only an estimate until the book runs through, based on the information we have from the SFS that customers have given us - that about 10% to 12% of the customers in arrears will ultimately end up on a split. In AIB’s case that would be somewhere between 1,500 and 2,000 split mortgages. That is what we think it is going to end up at, there or thereabouts, based on the information on affordability that we have.

One might assume that a split mortgage offered to someone would be immediately taken up, but in a lot of cases it is not. At the moment it is around 50:50 between those who take up the offer of a split mortgage and those who do not. Some people do not wish to carry warehouse debt even though it carries 0% out to retirement. One of the issues that arises is what happens on retirement for a person who has a mortgage. We have submitted a new split product to deal with the issue because we learn as we go along in terms of the reaction to the Central Bank. We have changed our split product. Instead of reviewing someone’s income every three years we have said we would do it every five years. We have said we would split any uplift in income 50:50 with customers so that if they can get an uplift in income they may keep some of it. We have said that we will split any out of course money they may get in the form of an inheritance or windfall. Ultimately, what we have said is that when it reaches retirement, which was probably the main concern for many people, we would look at a person’s situation in retirement and affordability based on the criteria we would use to give a new mortgage rather than the affordability to pay down existing debt. We said we would be prepared to give people with a split mortgage a lifetime interest in the property and our recovery would come ultimately from the sale of the property or the estate. That would give people the certainty that when they reached retirement age they could stay in their home. We have submitted that option and we are awaiting approval from the Central Bank. I do not envisage any issue with getting approval from the Central Bank but a period of time is required before the option goes through. That may make a split mortgage more attractive. As it stands, not every offer of a split mortgage that we make is taken up, even though intuitively one would think it would be the case that it would be accepted. Less than half of such offers are accepted at present.