Joe Costello (Dublin Central, Labour) | Oireachtas source

I am delighted to speak on this Private Members' motion and I commend the Technical Group on tabling it. It is important we debate an issue of such importance that deals with housing, mortgages and people's lives and families.

This matter has been ongoing since the start of the recession. We know the background to what happened. During the Celtic tiger years, funding was thrown around like confetti, with 100% mortgages available everywhere and people were nobodies unless they got on the property ladder. People were talking not just about homes but about the property ladder and the number of properties they could accumulate. It did not matter where these properties were built and if tax incentives pointed them in one direction, they were built in those areas. We are now witnessing ghost estates being demolished. Some 250,000 additional homes were built in those years. In 2006 we, a small country of approximately 4.5 million people, built almost exactly the same number of houses as were built in England, a country of 65 million people. Anyone in their right mind should have seen that what was happening in 2006 was unsustainable and unrealistic. Nevertheless, the fires were fuelled by further tax incentives and the end result was that the massive bubble led to a massive bust. A large number of developers who had come to the country and built the houses soon departed. We moved from one extreme to another, with virtually no housing being built. Housing that had been built was mainly built in the wrong place, with the exception being Deputy Mick Wallace, who was building them in the right place, in Dublin. Nevertheless, he also encountered problems.

In 2004 and 2005, there were no mortgage arrears and nothing that exceeded 90 days. That moved up rapidly from 2008 as the situation deteriorated. The number of mortgages in arrears for principal dwelling houses increased for four consecutive quarters. People could not afford to pay and became unemployed. Between 2008 and 2011, 250,000 people lost their jobs. A crisis was created given the major cost of houses at that time and the number of people who purchased them because finance was cheap and easy to get. It was a bubble we must never allow to inflate again.

There is no easy solution to the mortgage crisis and what is proposed is, by and large, positive and forward-looking. The Government has researched and implemented a number of measures to deal with the problem such as the provision of the mortgage advisory service, the reform of the insolvency and bankruptcy regimes, and the strengthening of the code of conduct on mortgage arrears. The code of conduct is a central issue that the members of the Technical Group who have signed the motion would like to see addressed. I have a certain sympathy for that idea but the code of conduct is mandatory for lenders and its implementation is monitored by the Central Bank. There are on-site inspections of mortgage lenders and the Central Bank sets the mortgage arrears resolution targets that banks must meet on a quarterly basis. For example, the targets for the fourth quarter in 2014 require the banks to prepare sustainable solutions to 85% of customers who are more than 90 days in arrears and to conclude agreements with 45% of customers by the end of 2014.

We will examine those figures to see those targets have been reached. They may sound ambitious but the Cental Bank is making those demands. It will undoubtedly result in a decrease in the number of mortgages in arrears.

The overall figure has declined this year but the number of mortgage holders in arrears for more than two years has continued to increase. There has been an overall decline but the numbers of people in the most difficult position have increased. I have obtained figures from the Courts Service indicating the number of possession orders made in the Circuit Court have increased significantly in recent months. The average number of possession orders made in each quarter from the start of 2013 to the first quarter of this year was 88 but this more than doubled to 218 in the second quarter of 2014. That is the direction in which the trend is going. Unfortunately, the figures are only available from the Courts Service and the recorded statistics are not available in respect of residential possessions. We do not have the breakdown of other property repossessions as well as residential repossessions, which seems to be a serious flaw in the statistics. I have written to the Courts Service to ask that it address this issue in the way it compiles statistics.

I am concerned that lending institutions, particularly banks, are beginning to head down the repossession route, largely due to the upturn in the housing market. It was not as attractive in the past to repossess a property because the market was not there for purchase but the danger now is that as the market picks up, the lending institutions will see markets in which to sell homes. The incentive will be for repossession to become the norm rather than the exception, and that must not become the case. The Government has made it clear that repossession should be a last resort, coming at the very end of any other processes. The Irish people have given unprecedented support to lenders and co-operated with them in every element of the process in seeking to find a particular structure that would suit in dealing with people in difficulty. Such efforts should be reciprocated by the lending institution and we should ensure that repossessions remain a last resort.

We have now moved from cases of 100% mortgages to a position where the Central Bank is demanding a loan limits of 3.5 times the applicant's salary, with a 20% deposit. That is a mistake, particularly with regard to the deposit percentage. How can a young family get a roof over its head when a €200,000 house, for example, requires a €40,000 deposit? The required deposit should be reduced by half to 10% of the total loan, and the loan limit of 3.5 times a person's salary should be a sufficient guard against mortgages getting out of control. It is important to ensure that young families get a roof over their heads, and it should be made as easy as possible for them to get an initial deposit before working with a bank on a salary ratio limit. It is a more reasonable element in the proposal.

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