Colm Burke (Fine Gael) | Oireachtas source

I welcome the Minister of State. We need to deal with other issues as well as that of mortgage arrears. For the past two years the Government has been working to encourage job creation, as jobs generate income and borrowings can be serviced. The Government has made significant progress in the past six months on the issue of financial stability, which will assist many families in dealing with the difficulties they face. Once there is financial stability, it will be possible to move forward on the issue of job creation for unemployed mortgage holders. Much has been done in this regard in the past two years. The third element is how to deal with the issue of mortgage arrears. A large number of mortgage holders are in arrears and in many cases it will be very difficult for them to service their loans. The Government introduced the personal insolvency legislation which will work to give people an avenue to deal with their mortgage difficulties.

It is interesting to reflect on the progress made by the country. As a practising solicitor, I remember the case of a man with four young children who wished to buy a three bedroom semi-detached house, on which the deposit was £100 which he did not have. I was able to send him to a bank to borrow the £100 in order that he could pay it and buy the house. What happened to the property market then given that the most expensive item anyone will buy is a house? We allowed the speculators and the developers to make huge profits without any restriction.

In 2002 Peter Bacon gave us plenty of warning. In 1997 property in Hong Kong had decreased in value by 70%. We were doing exactly the same in Ireland, but we did not heed the consequences in Hong Kong. When house prices are allowed to rise, the cost of a mortgage also rises. When mortgage costs increase, wages must also increase. When wage costs increased, the country became uncompetitive. All of this happened, not during the lifetime of the Government but during previous the 14 years under other Governments. This should not be forgotten when solutions are being proposed.

I agree that the banks made very significant mistakes. I refer to an example in which people were forced to sign documents and they did not know what they were signing. A gentleman who came to my office understood he was signing a guarantee on a €40,000 top-up loan for his daughter

She had already borrowed €220,000. I asked him if he was sure he only signed a guarantee for €40,000 and he said he was absolutely definite about it. I pulled a copy of the title to his daughter's houses from the Land Registry folio to find he had signed a mortgage for €260,000 on a house now worth €140,000.

We need to examine many things which happened over the past number of year to ensure they never happen again. We must deal with people who are in financial difficulty and we need to be innovative in how we do so. Going back to the 1980s, there was a huge slump in the property market and we introduced particular grants to allow people surrender local authorities houses so they could buy their own houses but we now need to be far more innovative in dealing with this issue.

The personal insolvency legislation has been enacted but we need to look at new ideas. In Germany, the developer builds the house but does not furnish it. The person who buys it rents it out for 20 years and the person who occupies it must pay the cost of furnishing it but he or she has a guarantee of being able to live in it for 20 years. We need to look at new ideas in regard to how we provide housing in that it is not just in two distinct ways, namely, owning a home and having a mortgage or living in a local authority house. We need to look at that third idea rather than having the short term 12 month or two year letting agreement. We need to do something more than what we are doing already. It has worked very well throughout Europe over the past half a century. We need to look at that system so we can keep rents down and get better value for our money in terms of how those properties are managed. We need to move forward in that area and not just look at this area alone. There are many other areas at which we need to look and we need to be very innovative in how we do so.

This debate is welcome. It is important we do everything possible to support people who want to stay in their own homes but who are in financial difficulty. We must do everything possible to ensure the maximum number of people and families can do so. That is the constructive way this Government is approaching it.