KILDARE MONEY ADVICE: Is the mortgage debt nightmare coming to an end at last?

Jill Kerby gives her views

Jill Kerby


Jill Kerby


KILDARE MONEY ADVICE: Is the mortgage debt nightmare coming to an end at last?

File photo

Personal insolvency arrangements or PIAs are on the rise — and that is a very good thing.

It’s a good thing for the debtors who may have been in financial difficulty for some time and are finally able to achieve closure and get on with their lives. It is also a good thing for their creditors.

Where these creditors are wholly owned by the state, as in the case of AIB and its satellites, the ESB and Haven, the winding down of long-standing, non-performing housing debts might mean that the far-higher mortgage interest rates that are charged to new customers here may eventually settle at levels comparable to what home borrowers pay in other EU states that haven’t had a 10 year legacy of property AND bank collapse. (The difference is nearly 2% in some cases.)

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According to the latest report from the Insolvency Service of Ireland (ISI) there were 998 new debt solution applications in total for first quarter of this year compared to 946 in Q4 of 2017. The vast majority, 870 of them, were PIAs, the personal insolvency arrangement which ISI Director Lorcan O’Connor described as “the solution that returns debtors to solvency while keeping them in their homes in 90% of cases.”

Meanwhile, other debt solutions outside of insolvency — the Debt Resolution Notices (DRN) for smaller amounts of personal debt and Debt Settlement Arrangement (DSA) for non-mortgage debts have gone up (+9%) and down (-10%) respectively, between the two quarters. There were also 462 Protective Certificates issued in Q1, down from 581 in Q4 2017. These certificates protect debtors from any further action by their creditors. Some 298 arrangements were approved in the first quarter of this year compared to 310 in Q4 of last year and there were 120 last year.

Since 2014, when the service began, there have been a total of 2,519 bankruptcies, which are now discharged after just one year.

The total value of the debt concerned amounted to €1.164 billion, with buy-to-let mortgages accounting for 51% of that sum, or just over €588 million and private residential property debt nearly 19% of the balance or nearly €219 million.

The latest report also confirms what is already pretty well known in every town and city — that the majority of debtors (over 68%) availing of these settlements are in the most productive cohort, aged between 35 and 54 and married or in a civil partnership (63.3%).

Statisticians will certainly relish this latest set of figures. Debt settlement applications and approvals have been falling off sharply — reflecting the general trend of debt being paid down (or written off), but also how much the economy has recovered.

The rise of engagement with the banks and of PIA applications certainly suggests that the tougher stance taken by the ECB and Central Bank about our ongoing, high volume of arrears may be working. By the end of last year there were about 28,000 mortgages in arrears, and half of those, it has been reported could be in line for repossession if not other solution is found.

However, the consequences of pursuing this last tranche of debtors, who have either declined to deal with their banks until now, or were stymied by the banks when they did try to negotiate with them suggests, is going to have serious consequences in terms of homelessness, consumer advocates like David Hall of the Irish Mortgage Holders Organisation (IMHO) have warned.

Anticipating more court actions, Mr Hall set up a not-for-profit housing body, iCare Housing, in September 2017 in association with AIB to facilitate the governments’s mortgage-to-rent scheme that aims to keep owners and families in their homes, this time as tenants. Under this scheme qualifying owners have their outstanding debt written off, get to keep their homes and have an option to buy it back some day at the price iCare purchased it from their bank. To qualify for iCare you must be in arrears; your house or apartment must be within a certain value (ie less than c€365,000 or €310,000 respectively); you must be eligible for social housing and you will pay an income-related rent, based on local authority rents. Security of tenure is the aim of the scheme and some iCare clients will remain in their now-rented homes for life. (See for details.)

So are we finally coming to the end of a decade-long saga of mass property related debt and insolvency? The ISI’s latest report would suggest so. But the most important message is that initiatives like iCare, Abhaile (the ISI’s service with for mortgage holders in arrears) and personal insolvency and bankruptcy arrangements (see mean there may still be a chance for a ‘better’ outcome. And a brand new start.

Jill Kerby can be contacted on email at