Borrowers in default will pay up to € 4,500 extra on mortgages

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Borrowers who took advantage of a mortgage payment break during the Covid-19 crisis can expect to pay up to € 4,500 in additional fees on their mortgages, an Oireachtas committee said. .

This emerges from this month’s correspondence from four of the major retail banks – AIB, Bank of Ireland, Permanent TSB and Ulster Bank – to the Oireachtas special committee on the response to Covid-19.

In a letter dated July 21, Ulster Bank told the committee that a borrower with a balance of € 250,000, an interest rate of 2.5% and 30 years remaining on his mortgage would pay an additional € 4,468. by extending the duration of his loan by the maximum of six months authorized. This is reduced to € 2,502 if the borrower repays the balance over the normal term of the loan.

Credit rating

Ulster Bank has accepted 12,000 mortgage payment interruptions since March. “A payment interruption allows monthly principal and interest repayments to be temporarily deferred / suspended for an agreed period (initially up to three months) without any negative impact on the borrower’s credit rating,” said Jane Howard, Managing Director of Ulster Bank.

TSB permanent chief executive Eamonn Crowley said the average home loan with an interrupted payment had an outstanding balance of € 140,000, with an interest rate of 2.75 percent and 16 years to at the due date.

“If a customer with such a loan were simply to extend the term of the mortgage by the duration of the payment interruption, then the impact of a three-month payment interruption would be an increase of € 6 from its monthly payments over the remaining term of the loan, ”he said. This equates to approximately € 1,152.

In its response, AIB said the average mortgage balance for customers who took payment breaks was € 136,784, with a remaining term of 16 years, based on the average interest rate of 2.58%.

term of the loan

Those on a three-month break might expect to pay an additional € 583 by repaying the money over the original loan term and € 1,091 by extending the term. Those on six-month leave would pay an additional € 1,168 and € 2,190 respectively.

Some 23,801 customer mortgage accounts have benefited from payment disruption, AIB told the committee.

Bank of Ireland chief executive Francesca McDonagh said she received up to 1,000 requests a day from customers for a payment interruption. As of July 3, the bank had granted more than 20,200 discounts on home loans.

She said it was “important” that the bank continued to charge interest on mortgages during the hiatus period. “There are costs associated with providing mortgage payment breaks and our approach also ensures that we can sustainably deliver these important breaks to clients when they need them. ”

Ms McDonagh said the bank had also “increased the amount allocated to residential development loans by 400 million euros to a total of 2 billion euros”.


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