Stephen Donnelly (Wicklow, Independent) | Oireachtas source

I would like to support this Private Members' motion on the code of conduct on mortgage arrears and the mortgage crisis. I compliment Deputy Michael McGrath on his motion. Early in 2011, I co-sponsored a Private Members' Bill that urged action in the mortgage crisis, and it is quite a crisis. The figures we are talking about are the latest Central Bank figures, which refer to 95,000 mortgages. They are not the right figures. When we add in those in arrears of less than 90 days, the buy-to-lets and the restructured mortgages that are not in arrears, the figure is closer to 240,000. That equates to 650,000 men, women and children in Ireland living in these properties. I accept the Government's genuine efforts to set targets to restructure those mortgages in arrears. However, the arrears are simply the symptom. The cause is too much household debt and too little household income.

I encourage every Deputy to look at a piece of analysis by McKinsey from 2012 called "Debt and Deleveraging", which shows that all over the world, the only way to grow economically and create jobs is to deleverage or reduce the amount of household debt. That is when the private sector invests, that is when the economy grows and that is when jobs get created. That is why the recent changes to the code of conduct on mortgage arrears are not going to help the situation. In fact, they are likely to make the situation worse, because they will make it easier for the banks to restructure mortgages. However, most of these restructures will not involve any reduction in the total amount of debt. In fact, in many cases they will make the borrowers pay even more money, as they are put on interest-only arrangements or given a longer period over which to pay.

Split mortgages have been proposed as a solution, but they are not a solution. As the household hopefully becomes wealthier, the mortgage simply gets topped up again and again by the bank.

Debt for equity mortgages offer a solution that both protects the balance sheets of the banks and helps to reduce household debts, thereby allowing for private sector investment. I will be submitting a paper to the Government presently on this subject. It is a way of deleveraging debt while maintaining the integrity of banks' balance sheets and, critically, allows individuals and families to engage in good economic behaviour and helps us to grow our way out of the crisis.

See this speech in context