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Mortgage Lending

Dáil Éireann Debate, Tuesday - 18 December 2018

Tuesday, 18 December 2018

Ceisteanna (145)

Michael McGrath

Ceist:

145. 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 being marketed by banks; if he is satisfied that consumers are being made fully aware of the risk associated with a life loan; and if he will make a statement on the matter. [53012/18]

Amharc ar fhreagra

Freagraí scríofa

As I stated in reply to a parliamentary question on 17 April this year the Central Bank has advised me that it does not publish figures on lifetime loans. These are niche products, usually provided to those aged 60 or older. The Consumer Protection Code 2012 defines ‘lifetime mortgage’ as - “a loan secured on a borrower’s home where:

a) interest payments are rolled up on top of the capital throughout the term of the loan;

b) the loan is repaid from the proceeds of the sale of the property; and

c) the borrower retains ownership of their home whilst living in it; “

Currently the Central Bank is not aware of any banks marketing lifetime mortgages.

On the issue more generally, 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), 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.

Prior to offering, recommending, arranging or providing a lifetime mortgage to a personal consumer, a regulated entity must also ensure that the personal consumer is made aware of the importance of seeking independent legal advice regarding the proposed transaction.

A regulated entity must also include prescribed warning statements on the following, where they contain information regarding a lifetime mortgage:

- an application form;

- any other document provided to the personal consumer; and

- on its website.

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.

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