Written answers

Tuesday, 25 March 2014

Department of Finance

Mortgage Resolution Processes

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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214. To ask the Minister for Finance his views on recent statements from the European Commission on dealing with losses being incurred by banks relating to holdings of tracker mortgages; and if he will make a statement on the matter. [13204/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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As the deputy will be aware Tracker mortgages were a particular feature of the Irish mortgage market in the recent past with many tracker mortgages originated during the property market boom in 2004 to 2008.

During recent Review Missions of the Troika, the Irish authorities discussed the issues associated with these assets which were again highlighted in the recent European Commission's report on Ireland. Although these interactions did not yield any viable solution to the problem, we naturally remain interested in examining any sensible ideas that could help lower the funding cost associated with these assets.

I would point out to the deputy that although these assets continue to be loss-making and represent a drag on the Banks' profitability the situation is improving and is not preventing the banks returning to viability as evidenced by the recent encouraging results published by AIB and BOI.  Both Banks have signalled a return to profitability this year and over time it is expected that they will trade their way into sustainable profitability. This will place them in a better position to absorb the impact of the Tracker mortgages.

Furthermore, as recent capital market transactions have demonstrated the Irish banks have been able to access both secured and unsecured funding at competitive rates across a range of maturities. In addition, the deposit base has stabilised resulting in reduced reliance on central bank funding. Taken together this has helped to reduce the impact of the negative carry associated with tracker mortgages.

  The deputy will also be aware that in recent times the Banks have pursued self-help measures to address this issue by introducing innovative solutions such as offering negative equity type mortgages and allowing borrowers to retain tracker facilities when moving house for a fixed period. These initiatives together with the recovery in the property market and an associated rise in housing transactions will also help to alleviate the issue.

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