Dáil Éireann Debate, Tuesday - 24 July 2018
250. Deputy Michael McGrath asked the Minister for Finance the number of life loans in respect of residential properties in issuance here; the amount owed on these loans; if such loans are still being marketed by banks; if he is satisfied that the attention of consumers is being drawn to the risk associated with a life loan; and if he will make a statement on the matter. [33807/18]
Amharc ar fhreagraThe Central Bank has advised that it does not publish data on lifetime loans. These are niche credit products, usually provided to borrowers aged 60 or older, where the loan is secured on the borrower's home and where the interest payments are rolled up on top of the capital throughout the term of the loan, where the loan is repaid from the proceeds of the sale of the property and where the borrower retains ownership of their home whilst living in it. The Central Bank has advised that it is not currently aware of any bank marketing lifetime mortgages.
However, as part of the Central Bank's ongoing supervisory work, the Bank carried out some work in respect of ‘Lifetime’ loans in 2016. Based on information from lenders (which represented the majority of the market at the time in 2016), there were loans of approximately €640 million to approximately 5,000 customers outstanding.
If a regulated entity wishes to engage in the provision of lifetime mortgages, the Central Bank requires that transparency is provided to the borrower at the outset and borrowers must be treated in accordance with the Central Bank’s Consumer Protection Code 2012 (the Code). The Code requires that, prior to offering, recommending, arranging or providing a lifetime mortgage to a consumer, a regulated entity must inform the consumer of the consequences of purchasing a lifetime mortgage and provide information on;
- the circumstances in which the loan will have to be repaid
- details of the interest rate that will be charged
- an explanation of the impact of the rolling up of the interest over the duration of the loan
- an indication of the amount required to repay the loan at maturity
- the effect on the existing mortgage, if any; and
- an indication of the likely early redemption costs which would be incurred if the loan was redeemed on the third and fifth anniversary of the loan at five yearly intervals thereafter.
Furthermore, the Code also requires that a regulated entity must ensure that the consumer is aware of the importance of seeking independent legal advice regarding the proposed lifetime mortgage loan transaction.
In addition, the Consumer Protection Code 2012 also requires, at least annually, the provision of a statement of account including the opening balance, all transactions, all interest charged, all charges, the outstanding balance and details of the interest rate(s) applied to the account during the period covered by the statement.
