No new request for interruption of payment from September 30
The scheme put in place by banks to offer payment interruptions to borrowers in financial difficulty due to the Covid-19 pandemic will stop accepting new applications as planned from the end of this month, the government has confirmed. .
It follows a meeting between the Tánaiste, the Minister of Finance, the Minister of Public Expenditure and the chief executives of the country’s retail banks today.
According to a government statement, ministers used the meeting to stress the importance of protecting borrowers and offering solutions on a case-by-case basis to customers who are currently on Covid-19 payment pause.
Ministers have been told that lenders will ensure that customers who are struggling at the end of the payment break are supported with a range of options so that a suitable arrangement can be agreed.
“As of today, the banks have agreed that this will be on a case-by-case basis, with other options also available; reduced payments and interest only, for example,” said Tánaiste Leo Varadkar.
“Anyone in difficulty should contact their bank and we expect that arrangements will be made depending on each person’s situation.
“Banks need to understand people’s needs in this really difficult time and be aware of the extraordinary year 2020,” Varadkar said.
Lenders will ensure that customers who are having difficulty at the end of the suspension of payment are supported with a range of options so that an appropriate arrangement can be agreed.
Mr Varadkar added that there is no cliff coming on September 30 – it is only the last day borrowers can request a Covid-19-related payment break.
Finance Minister Paschal Donohoe said it was essential that lenders work with borrowers to ensure appropriate arrangements are in place for borrowers currently on payment hiatus.
“Lenders must demonstrate ongoing knowledge of customers’ financial circumstances and handle cases in the most sensitive way possible,” he said.
“It is in everyone’s interest that the number of people who cannot repay their loans is minimized; a point I reiterate to the banks during our engagement this afternoon,” he said.
Banking industry representative group BPFI said a wide range of solutions were being made available to customers coming out of the special Covid-19 payment breaks.
“2,500 employees across the five banks are actively working with customers coming out of the special six-month Covid-19 payment pause to fully understand their situation and put in place an individual solution for them,” said CEO Brian Hayes.
“The focus is on engagement, assessment and solutions for those most financially impacted by the Covid-19 pandemic.”
“Our goal is to offer personalized plans that will help clients deal with what is a difficult and stressful situation.”
He added that while further payment interruptions can impact a borrower’s credit rating, that record can be restored over time if they are able to return to full repayments.
However, Sinn Fein have criticized the government for failing to secure extended breaks.
The party’s finance spokesman said Irish borrowers have had fewer protections than borrowers in other European jurisdictions and as a result are now at risk of defaulting sooner due to inaction of the government.
We need your consent to load this content rte-playerWe use rte-player to manage additional content which may place cookies on your device and collect data about your activity. Please check their details and accept them to load the content.Manage preferences
The repayment breaks were introduced in March in response to the financial strain many homeowners, households and businesses were under due to the downturn in business and employment caused by Covid-19 restrictions.
The breaks were originally to be offered for three months, but this was extended for a further three months due to the serious economic situation.
Now that six-month period must be coming to an end, although many borrowers remain in financial difficulty.
The deadlines for reimbursement of real estate loans from local authorities will be extended
Earlier however, the government announced it would extend mortgage repayment breaks for a further three months for local authority housing borrowers facing financial hardship due to Covid-19.
Similar to the scheme put in place by the banks in March, the 15,000 local authority housing borrowers were previously offered breaks of up to six months.
However, with many of these people still facing serious financial hardship due to the economic impact of the pandemic, Housing Minister Darragh O’Brien has confirmed that a further three-month break will be offered.
People benefiting from the offer will be contacted by their local authority during the payment break to assess their financial situation and discuss options if necessary.
“I am also extending the deadline for requesting a suspension of payments until the end of 2020 to provide for borrowers who may still experience setbacks in the months ahead,” Mr. O’Brien said.
“It is important to note that no additional cost is due to the initial balance of the home loan for the borrower who avails himself of these measures, because the borrowers do not pay interest for the period of the breaks.
Borrowers experiencing financial difficulties are advised to contact their local authority as soon as possible.
By the end of August, 900 of those borrowers had been approved for a mortgage break.
Last week, the European Banking Authority (EBA) said that bank payment interruptions will be phased out from the end of this month, as planned.
The EBA said the breaks had proven effective, but it does not consider it appropriate at this stage to further extend such an exceptional measure.
But on Saturday Central Bank of Ireland Governor Gabriel Makhlouf says nothing in the system prevents banks from imposing further payment disruptions in place for borrowers impacted by Covid-19.
Mr Makhlouf said if borrowers still see themselves struggling, they should contact their lender and have a quick conversation about the challenges they are facing.
He said lenders need to “start thinking very seriously about the individual’s situation and how they can support them”.
He added that nothing in the system prevented banks from allowing more payment interruptions, but said these interruptions should however be tailored to the needs of the individual, rather than system-wide interruptions. .
Continuing effect of the “tragic and seismic” Covid-19 pandemic
Central Bank Deputy Governor Ed Sibley said the continuing effect of the Covid-19 pandemic is “tragic and seismic”.
Ed Sibley told an online audience at an event hosted by the University of Limerick this afternoon that many borrowers will be temporarily or permanently unable to repay their loans in full.
They will need “additional personalized support” from their banks to address “creditworthiness and affordability” issues, he added.
He repeated the Central Bank’s message that “no regulatory hurdles” prevent lenders from offering borrowers additional payment terms provided they are affordable.
However, the Deputy Governor also referenced lessons the bank had learned since the financial crisis to say that while temporary forbearance may help, it may not be in the interest of long-term borrowers.
He said the problems could pile up and prevent borrowers from reaching a “more durable forbearance agreement”.
It was impossible to know the extent of loan losses at banks following the impact of the pandemic, but he said he expected it to be “material”.
Ed Sibley said that at its peak there were 152,000 loans to Irish borrowers under a stoppage.
The number of payment interruptions today is down about 25% from the peak and eight out of ten borrowers who received a payment interruption were repaying their loans normally before the pandemic.
20% of all small and medium business loans were still on pause at the start of this month with a much higher percentage in some sectors like accommodation and hospitality where the proportion was 46%.