BANKS RISK making people homeless and adding further vacant houses to an already struggling property market if they raise mortgage interest rates too much, Minister of State for Housing Michael Finneran has warned.
He has urged a new government to use its influence with the banks to ensure families do not lose their homes as a result of aggressive interest rate increases.
“I am appealing to the banks . . . It would be a terrible, unfortunate thing that we have vacant properties all around this country and we created more vacant properties because people were not able to make repayments. That would be a scandal, and should not be allowed,” said Mr Finneran yesterday at the launch of a new service for homeless people.
He said many families were now at the “pin of their collar” and there was a certain level at which they would not be able to make repayments on their homes.
He said the number of family homes repossessed in the recession was still very low due to the leniency of the courts and action already taken by the Government. But he warned noises from the ECB about future interest rate increases and recent rises by Irish lenders were a cause of concern.
Last week Permanent TSB introduced immediate increases of between 2 and 3 per cent on its fixed interest rates. Most banks have also increased variable interest rates over the past year.
Mr Finneran said the banks face commercial pressures caused by a gap between the rates they are charged to raise money and the rates they charge customers. He said the Government could intervene to protect homeowners.
“Is the State capable? Does it have the resources itself to bridge the [funding] gap? I think this is one area that should get a priority,” he said.
Mr Finneran urged a new government to continue, modify and vary the recommendations of the expert group on mortgage arrears and personal debt, which he oversaw, to suit the conditions.
More than 600 orders for possession, which allow a lender to repossess property when a borrower falls behind with mortgage repayments, were granted in the courts last year.
At the launch of a new Dublin outreach service for homeless people, Focus Ireland chief executive Joyce Loughnan said its services were seeing a lot more people presenting with mortgage arrears.
She said Focus Ireland provided advice aimed at helping people to hold on to their homes and link in to entitlements. She said it was the Government’s call on how to deal with the problem of home repossession.
“They have put all this investment into the banks and that is all public money. The public now has to get some return from that. There has to be a social benefit . . . It’s much cheaper for the Government to subsidise someone keeping their home than have someone falling into homelessness,” said Ms Loughnan.
Mr Finneran, who is not standing in the election, said he was disappointed the Government had not achieved its target of eliminating long-term homelessness by the end of 2010. He said it should be possible for an incoming government to find suitable housing for the 400 long-term homeless within six months due to the new structures in place.
Report by JAMIE SMYTH - Irish Times