Joe Costello (Dublin Central, Labour) | Oireachtas source

I am pleased to have an opportunity to say a few words on this Private Members' motion. It is a bit rich of Fianna Fáil to lecture others on what should be done in respect of any matter which is, in effect, a legacy of its period in government. I refer specifically to the collapse of the construction industry and subsequent lack of equity in properties on which mortgages were taken out at the height of the bubble. In 2004-05, before the bubble occurred, there were virtually no mortgages in arrears of more than 90 days. At the end of 2014, almost 80,000 mortgages were in arrears for more than 90 days.

The number of mortgages in arrears declined by 26,000 last year, which indicates significant progress has been made. There is no single solution to the mortgage crisis. The Government has implemented a range of measures to address the problem. They include the establishment of the mortgage advisory service, reform of the insolvency and bankruptcy regime and the strengthening of the code of conduct on mortgage arrears. The code of conduct is mandatory and its implementation is monitored by the Central Bank through on-site inspection of mortgage lenders, which is welcome. I also welcome the decision of the Central Bank to set mortgage arrears resolution targets which the banks must meet on a quarterly basis. The target for the fourth quarter of 2014 required the banks to prepare sustainable solutions to 85% of customers whose mortgages were more than 90 days in arrears and conclude agreement with 45% of such customers by the end of the year. The Central Bank recently reported that these targets were met. Clearly, therefore, progress has been made in this regard.

I am concerned that the lending institutions are more readily moving towards the route of repossession. This move is largely attributable to the upturn in the housing market. House prices are much more attractive than they have been, which means banks find repossession a much more attractive option. This is a highly dangerous development which appears to be gaining momentum. As the Government has consistently stated, repossession should be a last resort and avoided where possible. Notwithstanding this, a large number of mortgages are in distress. Some 30,000 mortgages have been in arrears for more than two years and 80,000 have been in arrears for more than three months. Action must be taken to deal with these mortgages

We have to look again at the issue of the bank veto. It no longer serves any useful purpose to allow the banks to have the final say in any debt deal. The Minister should look at Deputy Penrose’s legislative proposals on reducing the bankruptcy period from three years to one year. This will bring it into line with what is operational in the United Kingdom and in Northern Ireland, the other part of the island. This should be the norm for the duration of the crisis. These two measures would help enormously in dealing with distressed mortgages over two years in arrears.

A third measure is necessary for dealing with the high interest rate burden on variable rate mortgages that stand at over 4% when the bank borrowing rate is 1%. The State should be looking at a reduction in the variable interest rate mortgages of AIB, a 99% State-owned bank, of a minimum of 0.5% rather than the rumoured 0.25%. I welcome the statement by the Minister for Finance today that he will initiate discussions with the six main lenders in banking with a view to seeking reductions in interest rates in the near future.

While resolving the legacy mortgage issue we inherited, we most look to the future generation of potential mortgage holders. They have been hit hard by the Central Bank requirement of a 20% deposit for a house purchase. We have to provide some mechanism to allow first-time buyers to acquire deposits and, therefore, acquire a home. The first-time buyer’s grant was the tried and tested method in operation for many decades until 2002. It made no contribution whatsoever to the property bubble in later years. This should be reinstated with a central government grant for first-time buyers to enable them to come out of the rental market, which is becoming a property bubble in its own right, to purchase their own homes

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