Alan Kelly (Tipperary North, Labour)

It is clear from the statements made so far that there is much in common between the concerns expressed by Members of the Technical Group about the plight of ordinary homeowners facing the challenges of making ends meet and honouring their mortgage commitments in the current economic climate and the sentiments expressed in the programme for Government on this issue. Nevertheless, I will refer to some key issues raised by the Deputies in the course of the debate to ensure the House understands the constraints and challenges facing the Government in addressing these issues.

It is important to keep a perspective on the extent of the impact of the issues raised in the debate, as solutions come with a cost at a time when the Government is committed to major reductions in public spending and when tax revenues are down. In that context, I note that Deputy Pringle is forecasting that wholesale repossessions are about to happen. The Government shares his concern, particularly for individuals unable to meet their mortgage repayments and who are facing possible repossession of their home. However, repossessions remain low and both the overall statistics and anecdotal material from some of the banks indicate that a significant number of those who fall into arrears manage to rectify the situation. In short, the system we now have is working reasonably well.

It is worth noting that repossession orders granted by the courts do not necessarily lead to homes being repossessed. When a repossession order is granted, homeowners can still work with their lenders in exploring alternative repayment measures, such as those outlined in the code of conduct on mortgage arrears, CCMA. Mainstream lenders, and particularly those benefiting from the State guarantee, have been very reluctant to take the route of enforcing repossession. The total figure for legal repossession of owner occupied homes by institutions covered by the Government guarantee for 2010 was 50, which is extremely low when compared to the UK and other jurisdictions. While I accept it may well be 50 too many, it is a fact that repossessions even happen in good times. It is also important to note that many repossessions involve mortgages taken out with the so-called sub-prime lenders, whose market consists mainly of borrowers in the higher risk category, many of whom would have been turned down for loans by the main lending institutions.

It is easy to understand why, for many, the solution to relieving homeowners is some form of debt forgiveness, particularly for those, including myself, who bought family homes during the 2004 to 2007 period. There are arguments in support of such proposals, such as those presented by Deputies last night in the House. Such arguments point to the inequity of the burden placed on the taxpayer in bailing out the banks, the institutions which promoted loans with high loan to value ratios and approved mortgages beyond the limits of normal prudential guidelines at a time when house prices were clearly over-inflated. However, we must be clear that any form of debt forgiveness, whether in the form of a downward revaluation of homes and consequent reduction in mortgage for the home owners, as suggested by Deputy Daly, or a write-off of a portion of the mortgage by the lender, imposes costs on the economy and the taxpayer in an era of necessary cutbacks in public spending and when the sovereign debt is under daily scrutiny by the international markets. To put it simply - if we forgive debt, somebody must pay for it.

On the issue of mortgage interest supplement, Deputy Ó Cuív raised a valid point about the need for careful targeting of home owners most in need of financial assistance from the State and the role of the mortgage interest supplement scheme in addressing this need. This scheme allows individuals to be paid a mortgage interest supplement on a discretionary basis where the amount of mortgage interest payable by the claimant is in excess of the amount that is considered to be reasonable to meet their residential needs. At the end of April 2011, there are 18,569 persons currently in receipt of mortgage interest supplement.

Deputy Daly and other Members referred to the need for the Government to intervene as the major shareholder in the guaranteed banks to prevent them from raising the variable interest rates, which are a source of further pressure on already hard-pressed mortgage borrowers. The Deputy will appreciate that it is important a balance is achieved by the Government between influencing the banks through the bank guarantee scheme and other financial support incentives, while at the same time being seen to have a hands-off approach to the daily running of these institutions, which must operate on a strictly commercial basis. Ireland had very low mortgage rates in recent times, but it is clear that this is coming to an end for both owner-occupier and commercial mortgage holders.

The Government is very aware of the difficulties facing some home owners and shares many of the concerns expressed in the motion by the Members of the Technical Group. Indeed, it is a welcome and constructive motion. It is very important that this nation gets things right and is seen to follow sensible courses of action. Through the proposal contained in the programme for Government along with implementation of recommendations in the final report by the Cooney group, including the mortgage interest supplement and other measures, the Government is taking the appropriate courses of action to provide effective support to home owners who find themselves in difficulty. While I have great sympathy with many of the arguments put forward by Members towards helping people who are under pressure, the situation in which we find ourselves is such that in trying to help those people, we could well end up punishing the taxpayer and, believe me, the taxpayer has had enough.

The debate about how we get people other than taxpayers to pay for our banking debt is one that will ultimately be resolved at European level. This Government is working tirelessly on a diplomatic level to generate political support in Europe for a more positive solution to the bank debt that does not disadvantage the taxpayer.

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