Sinn Féin TD Pearse Doherty has published draft legislation in a bid to force banks to cover the cost of mortgage payment breaks.
The bill calls on banks to cover the interest cost for mortgage-holders who apply for a payment break due to income loss as a result of Covid-19. Some 80,000 mortgage holders are on payment breaks, but interest still accrues.
As it stands, some borrowers face being saddled with extra debt of thousands of euro after the Covid-19 crisis.
Sinn Féin’s Mortgage Moratorium and Suspension of Interest Bill 2020, seeks to prohibit the charging or accrual of interest by banks on mortgage holders who have availed of a payment break due to loss of income as a result of Covid-19.
Teachta Doherty said; “On 18th March, the government and the banks announced measures to provide relief to customers and mortgage holders. Under these measures, mortgage holders could apply for a three month break on their mortgage repayments, and they can now apply for a three month extension also.
“By 28th May, close to 80,000 mortgage holders have applied for a payment break. Under the payment break, borrowers will not pay principal or interest for the period of the payment break – however, they will be charged interest for the period of the break.
“This means that a borrower who lost their job or family that has lost income because of Covid-19 will face thousands of euro in additional interest payments over the lifetime of their mortgage.
“For example, a Bank of Ireland customer with a 30-year mortgage and €200,000 outstanding in debt with be hit with a charge of over €2,500 if they apply for a six month payment break.
“This will result in tens of thousands of workers and families facing higher debt and interest charges as a result of taking a payment break.”
Speaking yesterday, Deputy Doherty said it was unfair that banks faced no cost at all while Irish mortgage holders will bear the cost of the Covid-19 crisis.
He said: “Other countries across the EU – including Germany and Spain – have introduced legislation to ensure the cost of mortgage payment breaks is borne by the banks, not borrowers. There is no reason this cannot be replicated here.
“The Bill I am publishing today will prohibit the charging of interest on mortgage holders who take a payment break because their income has been hit as a result of Covid-19.
“This means that any mortgage holder who is financially vulnerable as a result of Covid-19 can apply and be granted a mortgage payment break for a period of up to six months with no interest charged for the payment break as happens now. Their credit rating will not be affected.
“For those who have taken a payment break already, no interest will be charged on the extension they apply for.
“Sinn Féin will submit this legislation to the Department of Finance and want it acted on as soon as possible.”