Mortgages deal to half monthly bill
PILOT: Seven banks on board in scheme
Mortgage repayments will be slashed in half for struggling homeowners under a radical new deal hammered out by Irish banks.
Seven banks have agreed to moves to set aside a portion of mortgages for homeowners to pay off at a later stage.
The move will mean that mortgage holders can delay repaying a section of their loan, giving them instant relief from monthly demands.
But the banks are also the winners in this 'split mortgage' deal.
The scheme will include interest charges on the part of the mortgage that is being set aside, despite objections from the Central Bank.
Bank of Ireland, AIB/EBS, Permanent TSB, Ulster Bank, KBC Bank, ACC and IBRC -- which now controls Anglo and Irish Nationwide -- are all on board with the proposals.
It's understood that up to half of an outstanding mortgage loan could be put aside by the banks.
This gives families the room and the time to get their finances in order.
It's understood the portion that is set aside could be paid off when the mortgage holder retires with a pension, dies and the house is sold, or when the children in the house start earning.
The scheme is due to come into place by the end of the year and would be reviewed every three years.
Two of the banks have also proposed to reduce interest rates for those unable to meet monthly payments.
And others have proposed putting struggling homeowners on long-term, interest-only deals.
A family with a €300,000 mortgage on a 3pc interest rate may be currently unable to meet monthly repayments of €1,400.
But if half of this loan was parked, monthly payments could be slashed to €700.
But in the long run, if the bank charged interest on the part that was parked, the repayments would reach a figure closer to €1,000.
Mortgage holders' support group New Beginnings representative David Hall said that charging interest in this way would undermine the entire split mortgages plan.