Mr. Gerry Mallon:

I thank the Senator. I wish to make two points, first, I will outline what we do with customers who are in negative equity and I will ask my colleague, Mr. Stanley to comment on the options for those customers.

In respect of our submission on loan to income, what we were trying to say, that the loan to income ratio is a coarse tool and does not take cognisance of an individual's commitments. Two people may have the same loan to income ratio, but one person could have a great many other commitments, debt or a second family to support or whatever. To make a sensible lending decision one would need to sit down with a customer and look at their income and look at their outgoing and decide what is affordable and this is too coarse a metric. It might work at a macroeconomic level across an entire portfolio but on a customer to customer basis, it does not really work.

I completely appreciate the Senator's perspective in respect of people who find themselves caught in a negative equity trap and we have an approach to dealing with that, which my colleague Mr. Stanley will outline.