Ulster Bank’s first time buyers still waiting for mortgage interest relief

Posted on November 23, 2012 by admin

First time buyers with Ulster Bank have yet to receive higher rate of mortgage interest relief

First time home buyers who got mortgages with Ulster Bank during Ireland’s peak of economic growth are yet to have the full rate of interest relief applied to their repayment schedules. Some 38,000 couples and individuals who purchased their first home between the years of 2004 and 2008 were entitled to an increased rate of tax relief thanks to last December’s Budget.

In that Budget, anyone who drew down a mortgage between that four year period were entitled to a 30% rate of tax relief as opposed to the 25% currently available to first time buyers which will be abolished at the end of the year. But almost a year on, Ulster Bank customers entitled to the higher rate are still waiting for the increased rate to be applied on their mortgage accounts.

The lender has cited difficulties with upgrading its IT system so that they can apply the 30 percent rate to relevant accounts as their current system only allows for a maximum rate of 25 percent. Indeed, the bank is not a stranger to having computer problems. It was at the centre of technical issues resulting in most of its customers not being able to access their accounts for the month of June.

However, resolving the outstanding issue of applying the higher rate of mortgage interest relief for first time buyers is going to take Ulster Bank more time due in part to the technical issues experienced during the summer. The software needed to apply the higher rate to eligible mortgage holders will not be in place until March 2013. It has informed the Revenue Commissioners of the time frame who have agreed to retrospectively apply the extra 5% to eligible borrowers when the IT program is fully operational.

Mortgage holders in negative equity will soon have options

Posted on November 19, 2012 by admin

People with mortgages to have several options to deal with negative equity

The mortgage crisis in Ireland has been well documented with countless people trapped in significant negative equity which they are finding next to impossible to repay. Coupled with lowered activity in the domestic economy due to a high unemployment rate, home owners face a protracted battle with their current debt.

With the nation gripped by the effects of the recession for four years, the institutions who approved mortgages that ultimately proved unsustainable are coming to realization that arrangements will have to be made. Indeed, banks are invariably formulating a set of mortgage products with some even piloting schemes with a selection of troubled mortgage holders. Lenders are now preparing to offer a range of more viable options to those with long-term arrears.

The only alternative product available to the general public is split mortgages. This is where your mortgage is split into two portions – a portion that you continue to pay off and another portion which is put aside. The ‘active’ portion being paid off will be subject to interest while the ‘dormant’ amount would only be repaid when the first portion is cleared or if your financial situation improves. However, some banks will apply interest charges on both portions while other won’t. For example, AIB and EBS are not applying interest on the amount put aside.

But BOI and PTSB have said that customers availing of this option will pay full interest on the full loan. Currently, three banks are offering split mortgages: AIB, BOI and EBS. Other banks are either testing their version of the scheme or in the process of launching it. Despite some debate from experts about the viability of the scheme if some lenders were to apply interest charges on both portions, using the scheme will allow those in debt trouble to keep their homes.

For those willing to move to a more humble abode, there is a more appropriate option. Owners who are struggling to repay a mortgage on a property in negative equity can avail of a trade-down mortgage. This type of loan allows a home owner to move to a cheaper home and carry over any residual debt from the mortgage following the sale of the old house onto the new mortgage. Like split mortgages above, this products is currently only available with AIB, BOI and EBS.

Considering the above choices, there is also another option that could be used by banks to fight against the arrears crisis – write-offs. The idea of writing off debts has sparked much debate. Considering that almost 80,000 mortgage holders are in arrears of at least 3 months, the prospect of resorting to debt write offs for unsustainable mortgages are become ever more real. The emergence of these options suggests that the banks are starting to finally get proactive with dealing with negative equity mortgages.

It could take three years to get on top of mortgage arrears

Posted on November 15, 2012 by admin

Real progress on mortgage arrears won’t be seen until 2016

Arrears on mortgages remain a major stumbling block if the property market is to return to a state where sustainable lending takes place. At present, there are approximately 169,000 mortgage holders who are struggling to make full repayments. Over 77,000 of these holders have arrears of 3 months or more. Although one in five households is in trouble, the amount of people with debt issues has not yet reached its zenith.

According to analysts in Goodbody Stockbrokers, the arrears figure will reach its peak in the middle of next year. However, the number of troubled mortgages will only start to modestly recede during 2014 and 2015, and it won’t be until 2016 that marked progress will be made. It should be noted that the banks have allocated a €6.4 billion fund solely for debt restructuring.

Despite such a large sum of money put aside for the very issue, only a mere fraction of it has been utilized for the purposes of mortgage write offs. Since 2010, just €251 million had been spent by banks to lower monthly repayments on distressed home loans. But, it seems some of the leading institutions have finally realised the severity of this issue by forming a specialised arrears teams.

AIB and Ulster Bank announced that it will take this approach to directly contact its distressed mortgage base to offer working solutions to combat against unsustainable debt.