Terence Flanagan (Dublin North East, Fine Gael)
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Question 57: To ask the Minister for Finance if he will reply to a matter (details supplied) regarding negative equity mortgages; and if he will make a statement on the matter. [22882/11]

Michael Noonan (Limerick City, Fine Gael)
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The Central Bank has advised me that they wrote to all mortgage lenders to ascertain whether they were offering, or intended to offer, a mortgage product that would allow home owners to sell their existing home and transfer the negative equity portion of the original loan to the new loan. The Central Bank was concerned as to whether such a product was in the long term interest of consumers as it could lead to indebtedness at a time when there was no certainty over the direction of future property values. In addition, consumers would be moving to a new product and, consequently, those on tracker mortgages would move to fixed or standard variable rates which were generally higher than existing tracker rates. The higher rates would impact on the continued affordability of such mortgages and there would also be an increase in the loan to value ratios of many mortgages.

In response to the Central Bank's letter, only a small number of mortgage lenders said that they would consider offering such a facility, but it would be on an exceptional basis, would only be considered following an approach from an existing customer and would be subject to strict criteria in relation to debt service ratio, net disposable income, loan to value ratios, income multiples, credit history, transparency and suitability.

A trial period commenced in mid-2011 and is due to be assessed by the Central Bank and the institutions involved before the end of the year. Any institution offering such a facility may only do so in accordance with criteria agreed in advance with the Central Bank and subject to a trial period. Consequently any arrangement that might be agreed with a customer would have to be in the context of the parameters set out above and not as a result of the introduction of a negative equity type product.