BANKS AND financial institutions will deal “fairly and flexibly” with an estimated 14,000 people who have mortgages more than three months in arrears, the Irish Banking Federation (IBF) said yesterday.
At a meeting of the Joint Oireachtas Committee on Social and Family Affairs, IBF officials said under a new code of conduct lenders would wait a minimum of six months before taking legal action against borrowers in arrears. This period would extend to 12 months for banks which availed of the State’s recapitalisation scheme.
IBF chief executive Pat Farrell said the code, which was introduced by the Financial Regulator, covered all mortgage lenders, including subprime lenders such as Start Mortgages. Official figures indicate there has been a relatively low level of repossessions, with a total of 96 in 2008, or 0.01 per cent of all mortgages.
The IBF said this compared favourably with other countries such as the UK where there are 35 repossessions for every 10,000 compared to just one per 10,000 in Ireland.
Mr Farrell said: “There tends to be two types of customers: those who can pay and those who won’t pay. You find in a lot of cases that a person might not be prepared to deal with the issue until it comes to the legal stage.”
However, the IBF and its members were criticised by members of the Oireachtas committee for being too inflexible in dealing with borrowers on fixed-rate mortgages. Labour’s spokeswoman on social affairs Róisín Shortall said she found it “impossible to understand” how banks could charge borrowers anything up to €15,000 to exit a fixed-rate mortgage.
Fine Gael TD Seymour Crawford added: “This is having a serious impact on people whose incomes have been savaged through the levies and tax increases. The level of charges imposed by banks cannot be justified.”
Mr Farrell defended lenders, saying that borrowers were made fully aware of the redemption costs when they signed their fixed-rate mortgage contracts. Ending these contracts early entailed significant costs for banks.
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