The director of consumer protection at the Central Bank Colm Kincaid has called on people not to avail of short term credit options if they are in financial difficulties.
There was a range of supports and options available through lenders who would act to help stay in their homes, he told RTÉ radio’s Morning Ireland.
Rising costs and interest rates were putting pressure on people, particularly people on lower incomes who were least able to deal with it, he said. The Central Bank of Ireland was taking steps to combat that and to bring inflation down so that the cost of basic goods for people did not keep going up for the one in three households in the state who have a mortgage.
The impact of a rise in ECB rates and the subsequent rise in mortgage rates would vary depending on individual circumstances, the rate they are on, where they are in their mortgage and their personal circumstances.
“The really important thing for people to understand is that for anyone who is worried at this point that they may not be able to meet their mortgage repayments is that there is a very strong set of supports. They are there for them through the work the Central Bank has done with lenders over the course of last year and the year before, we brought mortgage arrears down to the lowest level it has been at since the global financial crisis and that has included finding solutions for people in long term mortgage arrears cases, some of the most intractable cases in the system that have been there for over a decade."
Tracker mortgages
Mr Kincaid acknowledged that people on tracker mortgages would experience the “most abrupt” increase in rates.
The Central Bank was taking a “borrower by borrower” approach, he said.
“We want to make sure that every one of those borrowers is supported. And how this plays out for people will very much depend on the personal circumstances that they are in. So if you're on a fixed rate, your interest rate will not be going up as the ECB raises rates. But it is important for you to know, when does that fixed rate come to an end so that you can prepare well ahead of time? If you're on a tracker, it will go up automatically.
"And if you're on a variable rate and that's up to your lender, so it is important for people to be looking to their personal circumstances, checking what rate they're on and getting advice and support."
Great efforts have been made to enhance the resilience in the financial system over recent years which was now paying dividends, said Mr Kincaid.
What I would say is contact your lender and engage with them.
People who are concerned about their situation should contact their lender, he urged. “What I would say is contact your lender and engage with them. There are very strong supports there, and we've seen that they can work and that alternative options can be found for people to keep them in their home, even in some of the deepest cases of arrears."
The Central Bank and the Money Advice and Budgeting Service (MABS) had both observed an increase in inquiries, which, in one respect, was encouraging because it meant people were being proactive.
“Another area that we are focused on for people to be vigilant about is short term credit. That's something we would encourage people to be really vigilant on because if you're starting now to use that kind of credit, the credit card, etc., to pay for things that maybe you were managing to cover month on month before, that's a really big warning sign to go and get that advice. And to also repeat again, there are options available for you."
