Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Ceann Comhairle for choosing this important topic.

We all want to see the mortgage arrears problem solved. We can all agree that one of the potential solutions for many borrowers is the split mortgage model. At the end of 2012 there were only 52 such split mortgages, but the evidence of the past couple of months is that the banks are beginning to offer split mortgages to varying degrees. We know, for example, that AIB has offered 1,400 split mortgages to its distressed borrowers in the first quarter of the current year and other banks are apparently doing the same.

The key issue I want to raise is the lack of consistency in the way in which the split mortgage model is being implemented. I refer, in particular, to the manner in which the warehoused element of the mortgage is being treated, especially the interest rate being applied to that portion of the mortgage. AIB does not charge any interest on the warehoused portion. While I do not intend this to be a Bank of Ireland bashing day, Bank of Ireland is charging full interest on the warehoused portion. As I understand it, Permanent TSB is charging 1% on the warehoused portion.

This makes an enormous difference to borrowers. If it is calculated that a distressed borrower with a mortgage of €200,000 can repay half of that mortgage, the other half is warehoused.

As part of the Bank of Ireland solution, that €100,000 will accrue interest over ten years at a rate of 4.5%, which will come to €57,000. The same customer with AIB would have no interest added to the warehoused portion, while in the case of Permanent TSB, at a rate of 1%, the figure would come to €10,500. The difference is dramatic. The point is that split mortgages are sponsored by the Government and the Central Bank, but, again, there is a distinct lack of uniformity and consistency in the manner in which they are being rolled out. If one looks at the other solutions proposed, we all know the terms “interest only”, “arrears capitalisation” and “term extension” mean the same thing across the board. It is not acceptable that, in essence, the split mortgage solution is being denied to many people through the terms and conditions attached to it. Will the Minister give a commitment to, at a minimum, raise this issue with the Central Bank and ask if it is satisfied with the manner in which the split mortgages are being rolled out? Will it ensure there is consistency and uniformity, particularly on the key issue of the interest rate applied to the warehoused portion of the mortgage?

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