Big five banks stick to guns on their mortgage break charges
IRISH banks have said they are going to charge struggling homeowners interest on mortgage breaks despite the Taoiseach’s warning that they should not profit from such schemes.
Nearly 80,000 mortgageholders affected by Covid-19 have taken payment breaks since March 18 which will incur additional interest of several thousand euro over the lifetime of the loans.
A family with a €300,000 mortgage that takes a six-month payment break will end up with a €4,300 interest bill.
This is being charged to Irish customers even as banks in Germany, Spain, Belgium, Hungary and Cyprus have put struggling borrowers’ home loans on pause.
Taoiseach Micheál Martin said yesterday that Finance Minister Paschal Donohoe will be raising the issue with lenders.
Labour Party leader Alan Kelly highlighted the issue in the Dáil and looked for assurances from Mr Martin that customers would not be liable for thousands of euros worth of interest if they had availed themselves of a mortgage break.
It comes after Central Bank Governor Gabriel Makhlouf told a Dáil Covid committee on Tuesday that banks are not required under regulatory rules to charge interest on mortgage payment breaks.
Sinn Féin’s finance spokesman Pearse Doherty TD called on the Government to intervene to prevent the banks ‘profiteering from the Covid-19 pandemic’, while David Hall, of the Irish Mortgage Holders’ Organisation, said it was ‘not right’ that the banks should make money from the pandemic.
The Irish Daily Mail contacted the five main banks – AIB, Bank of Ireland, Ulster Bank, Permanent TSB and KBC – and all said they would continue to apply interest to mortgages on payment breaks.
Mr Hall last night said: ‘They shouldn’t charge interest during the payment break – it’s amazing that you have companies and households who’ve been decimated by the pandemic yet banks will profit from it.
‘That’s not equitable in any shape or form. It’s not a break, it’s a deferral – the charges accrue.’
However, Banking and Payments Federation Ireland chief executive Brian Hayes said the banks were clear from the beginning on the cost of payment breaks.
Mr Hayes, a former junior finance minister, said the payment breaks are in line with European Banking Authority (EBA) and Central Bank guidance.
‘I want to be absolutely clear about this. The Irish banking sector produced these payment breaks in good faith and to help customers going through a rough time – those breaks were in line with EBA guidance,’ he told RTÉ.
The authority has since clarified that interest does not have to be charged on the 80,000 Irish mortgages covered by payment breaks once the amount is less than 1% of the entire interest bill.
Mr Doherty revealed Belgianowned
bank KBC was charging interest to its Irish customers while waiving it for mortgage-holders in its native Belgium.
The Donegal TD also revealed payment breaks did not accrue interest in Germany, Spain, Hungary and Cyprus. If the charges were waived in Ireland, it would cost the five main banks around
€300million – or €60million each. Mr Doherty said people should not have to pay ‘a Covid penalty’ because the Government shut down economic activity here and wages were reduced as a result.
The banks wrongly stated that the interest must be applied under rules from the regulator, he said, and questioned why they gave ‘clearly inaccurate information’. Mr Martin said: ‘The Minister for Finance will now engage with the banks in relation to this latest clarification from the EBA and the comments of the Central Bank governor.’
A spokesman for AIB said: ‘The Irish payment break moratoria including the accrual of interest is, always has been and remains fully in line with EBA guidance. We will continue to apply interest during the payment break period.’
Spokesmen for Permanent TSB, KBC, Ulster Bank and Bank of Ireland also confirmed that interest would be applied in the case of mortgage payment breaks.
‘It’s not a break, it’s a deferral’