The original purpose of the mortgage interest supplement scheme was to provide short-term support to eligible people who are unable to meet their mortgage interest repayments in respect of a house which is their sole place of residence. The supplement assists with the interest portion of the mortgage repayments only. There are currently approximately 8,900 people in receipt of mortgage interest supplement for which the Government has provided €17.9 million for in 2014.
Since June 2012, to ensure that those who were in mortgage difficulty engaged with their lender under the Mortgage Arrears Resolution Process (MARP) and avail of its forbearance arrangements, mortgage interest supplement has not been payable until applicants had agreed with their lender and complied with an alternative payment arrangement for a cumulative period of not less than 12 months. The expenditure on the scheme was some €55 million and provisionally €35 million in 2012 and 2013 respectively, in line with a reduction in the numbers of customers in receipt of the supplement from 18,700 in January 2012 to 9,800 in December 2013.
The Government’s strategy to assist those in mortgage difficulty is built around the following measures, as recommended in the 2011 Interdepartmental Mortgage Arrears Working Group (Keane Group), in four main distinct areas:
- Lenders providing sustainable and durable resolution options to their borrowers.
- A social housing response (Mortgage to Rent).
- Comprehensive advice to borrowers.
- Personal Insolvency Reform.
In the context of the overall strategy, the continued payment of mortgage interest supplement does little to assist recipients in improving the long term difficulty in addressing their mortgage problem and provides little incentive for the lender to provide sustainable solutions. The Keane Group’s over-arching theme was that the mortgage interest supplement is not an appropriate long term support and should become a time bound payment with an appropriate exit strategy to be formulated for the recipient.
As part of the fiscal adjustment required for Budget 2014, provision was made for the discontinuation of entitlement to mortgage interest supplement for all new applicants from 1 January 2014. Existing customers are not affected by this measure and may retain entitlement to the scheme over the next four year period. It is expected that during this four year period, existing customers would no longer require this support through sustainable solutions being put in place, securing employment or exit strategies sponsored by the Department of Environment, Community and Local Government, namely the Mortgage to Rent scheme.