Thomas Byrne (Meath East, Fianna Fail)

I am pleased to speak on this motion, which relates to the most important issue we face as a country, namely, the joblessness situation. What we are concentrating on here is what we do in terms of an immediate response to provide some help to the increasing numbers of people who have lost their jobs. Currently, 11% of people are on the live register, 320,000 of whom are fully unemployed. It is crucial that they get the welfare they need as soon as possible and that any debts they may have taken on when they could afford to do so are dealt with properly and fairly. Above all, we must ensure that people do not lose their homes. That must be a top priority for the Government and the House that people are supported to remain in their houses. Not alone is significant damage done to individual families who lose their houses – thankfully the numbers who have lost their houses are still low – but when that happens extensive damage is done to the economy also.

One can say what one likes about it but one of the drivers of the economy was the increase in house prices and a decrease in prices is bad for an economy. That is accepted by economists all over the world. The more repossessions that take place the more availability that will create in the housing market, which will lower prices to an artificial level because supply is driven artificially rather than by the market. That will further lower prices, which does not help the property market in any way nor the economy generally. In addition, there are the costs of housing people who have lost their homes and the associated social costs.

One of the big issues we will have to face is that of negative equity. Some refer to it as people being under water in terms of their property value vis-À-vis the mortgage. According to economists, negative equity is one of the factors that reduce one's incentive to pay back one's mortgage even if one can. If one is still in a good job and one's family home or apartment has reduced by 30% or 40%, which has occurred, one has less of an incentive to pay the mortgage. Negative equity makes it almost impossible for people to re-finance to a cheaper mortgage when they are in difficulties. They might be able to continue to pay if the option of re-financing was open to them. Some foreign institutions, largely owned by our nearest neighbour — in effect state banks — are not passing on the full mortgage reductions announced by the European Central Bank.

Some people who have jobs are having difficulty paying their mortgage and if they could easily transfer it then those difficulties could be alleviated. However, negative equity is preventing them from doing that. In addition, one cannot expand or change one's home if one needs to do so. I am aware of people who bought a one-bedroom apartment who got married and had twins but they cannot move up the ladder because of negative equity. That is something we will have to tackle. It may be a matter for the Minister for Finance, the Department of the Environment, Heritage and Local Government or the Department of Social and Family Affairs to consider what can be done about negative equity.

I have examined schemes in America and other locations around the world that have not been altogether successful but, nevertheless, we should consider them. They involve the concept of debt forgiveness where the principal sum owed is amended and banks take the hit. All manner of excuses are offered by banks as to why they cannot do that. However, if the reality is that the banks will never recover the principal, or the value of the property will not recover in the immediate or mid-term future then there is no point in pretending a principal exists if a house is to be repossessed and the bank will have to take a hit at that stage. It would be preferable for banks to take the hit before that happens, thereby encouraging borrowers to keep paying their mortgage and make it easier for them to do that and in so doing to maintain the economy.

There are ways of doing it. Schemes have been introduced in some parts of the world whereby an institution forgives some of the principal but charges a slightly higher interest rate. There are pros and cons to the solutions that can be found. As people could take advantage of such schemes, at all times those solutions should only apply to principal family dwellings and to those who are most in need. We will have to consider the issue of negative equity. In a place such as Stamullen in my constituency nearly everybody has moved in since the 2001 census and many but not all of them are in negative equity. That is true of many of my neighbours, probably including me – I have not checked lately——

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