Trevor Sargent (Dublin North, Green Party)

Ar dtús báire, ba mhaith liom a rá gur oth liom nach bhfuil an tAire Airgeadais, an Teachta Brian Lenihan, i láthair. D'iarr sé orm an freagra seo a thabhairt don Teachta Bannon.

I wish to start by addressing the Deputy's concerns on the need for supports for those who may fall into arrears on their mortgages and I will later address the issue of how mortgage providers deal with such situations when they arise and the role played by the Government and the Financial Regulator in responding to those difficulties.

It is obviously most desirable that as few people as possible fall into arrears with their mortgages and one of the ways of achieving that is to ensure mortgages are affordable in the first instance. In terms of the housing market, affordability in Ireland is currently supported by such factors as interest rates that remain low in historic terms — with today's ECB announcement providing further relief — and increases in mortgage interest relief available in particular to first-time buyers. Successive budgets since 2006 have increased the level of mortgage interest relief available to first-time buyers in order to refocus mortgage interest relief towards home owners who are in most need of assistance.

In order to alleviate the difficulty for prospective first-time buyers who previously may have had access to a mortgage from mainstream financial institutions, but who are now unable to secure sufficient loan finance, the Government has decided to provide assistance through the new home choice loan. Those loans are to be provided by local authorities to first-time buyers of new properties subject to a maximum loan of €285,000, and a maximum loan to value ratio of 92%.

Furthermore, it is envisaged that a new single streamlined Government equity product will be introduced in mid-2009 to change the way in which affordable housing is provided, to introduce greater equality into the system and to provide a basis for achieving greater consistency across the schemes and across different areas of the country. The Government will take an equity stake in the affordable units sold, which the purchaser can either buy out in steps or at the end of a fixed period. That means the State's investment will be better protected and should enable more funds to be recycled into affordable housing in the future.

The Minister for Finance has consistently highlighted the need for responsible behaviour by both borrowers and lenders and, in particular, the need to factor in to their financial decision-making the effects of potential future changes in economic and financial conditions.

Unfortunately, a number of borrowers develop debt problems. Anyone experiencing difficulty in repaying a mortgage or other loan should discuss the matter with the loan provider and seek appropriate financial advice without delay. The money advice and budgeting service, MABS, which falls under the remit of my colleague, the Minister for Social and Family Affairs, is a national, free, confidential and independent service for people in debt or in danger of getting into debt. Funding for MABS in 2008 is almost €18 million and is to continue at that level for 2009.

The Department of Social and Family Affairs also funds the demand-led mortgage interest supplement scheme, which provides short-term income support to those eligible who are unable to meet their mortgage interest repayments in respect of a house which is their sole place of residence. Support for the scheme was re-affirmed in the recent budget and payments from it have reached more than €20 million so far this year. As it is a demand-led scheme, the Government is committed to meeting all payments arising under it, thereby affording protection to those who need it when they need it most.

The Deputy will appreciate that recent media attention on court proceedings for home repossessions needs to be interpreted with caution, given the variety of circumstances that give rise to such cases. Although the number of cases involving applications for repossession orders is up in each of the past two years, it should be noted that orders are not always granted and do not always represent residential mortgages. Even when orders are granted, they are not always followed through and levels remain low compared to historical averages and in comparison to similar jurisdictions such as the United Kingdom.

Non-financial supports in place include the Financial Regulator's consumer protection code, CPC, which applies to home loan providers operating in the State, including so-called sub-prime lenders. The CPC requires mortgage lenders to undertake suitability assessments before offering a product or service to consumers as well as requiring the regulated provider to contact the consumer as soon as it becomes aware that a mortgage account is in arrears, irrespective of the amount of the arrears. The CPC also specifies that the regulated provider must have in place a procedure for handling accounts in arrears and the Financial Regulator's CEO has pointed out that the Financial Regulator considers this to include a requirement that lenders agree a remedial action plan with a borrower as soon as they detect arrears starting to emerge and to try to assist the borrower to manage his or her financial commitments and not allow the situation to worsen.

The Deputy may wish to note that the provisions of the scheme made under the Credit Institutions (Financial Support) Act 2008, requires institutions covered by the guarantee in Ireland to confirm their compliance not only with the consumer protection code, but also with the Irish Banking Federation's, IBF, code of practice on mortgage arrears, IBF code. The other IBF and Irish Mortgage Council members comply with the IBF code on a voluntary basis. In accordance with the IBF code, borrowers are advised to contact their lender about any problems they may experience in meeting their repayments schedule. It recommends that the borrower contact the lender after one missed scheduled payment, again irrespective of the amount, in order to prevent a situation of mounting arrears arising with negative consequences for both the borrower and lender. Once the borrower has contacted the lender, the latter will consider all viable options and develop a plan for clearing the mortgage arrears. Home repossession should be, and generally is, the last resort for the lender and the preferred method of dealing with arrears cases should be early intervention.

In the light of the above, I am satisfied that adequate safeguards are currently in place to minimise home repossessions in Ireland. The Government will continue to monitor the situation carefully and will consider the requirement for any further responses in order that the legitimate interests of mortgage holders are safeguarded.

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