What are the options if I can’t pay my mortgage?

Covid-19 is raising issues for both the business banking customer or individuals repaying a mortgage or other loan. Lenders say they are adopting a relatively flexible approach to the crisis although there is no uniformity in the approach adopted by the State’s main banks.

And what you can expect varies greatly depending on your status. Banks have made great play of repayment holiday options, but it appears this will be available only for mortgage customers. And for that group, it has been an option for stressed borrowers even before the coronavirus crisis.

Commercial customers who have approached banks on the subject of freezing loan payments reports that they have been told any such move would affect their future credit rating.

So what are the banks offering?

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Bank of Ireland is offering personal customers "flexible arrangements" such as loan payment breaks. Those customers have been advised to call the bank to discuss options.

For business customers, the bank is offering emergency working capital and flexibility on loan facilities.

Crucially, Bank of Ireland has said it is structuring its flexibility options in such a way that they won’t impact on a customer’s credit rating where that customer “is experiencing difficulty directly as a result of the Covid-19 situation”.

But other banks have not yet been so definitive in their position.

AIB has told its personal customers that if they're in trouble, or suspect that the future may pose problems, they should contact their local branch or a dedicated mortgage arrears support line. Some of the measures that can be availed of include an interest-only/moratorium period of up to six months; interest only repayment in certain circumstances; or credit options depending on the customer's specific needs.

The bank is also offering a range of supports to its business customers such as a 48-hour decision window on loans and overdrafts up to €60,000 and short term loans to replenish cash flow.

But it wasn’t clear on the credit rating implications that would pose.

“If a customer impacted by coronavirus agrees a payment holiday with the bank, it should not impact their ICB [Irish Credit Bureau] rating,” an AIB spokesman said. “However, if impacted, the customer will be advised. We urge customers not to stop paying their direct debits on their repayments as this could impact their ICB score due to non-payment. Therefore engagement with the bank at an early stage is crucial,” a spokesman said.

In Permanent TSB’s case, the option for mortgage customers is much the same – and along the lines it has been since the financial crisis. A spokesman told The Irish Times that it offers support to customers in financial difficulty already based on an individual’s circumstances.

On this issue of credit ratings, a spokesman said: “We are actively considering all aspects of our response to customers in these difficult times and have made no final decisions in respect of ICB impact.”

Ulster Bank said it would provide payment holidays for business customers and working capital supports. For mortgage customers it said that it could provide deferral for up to three months, but added there isn’t a blanket provision and circumstances will be assessed on a case-by-case basis.

While banks appear unclear on whether a person’s credit rating will be penalised by any flexibility, the Central Bank advised Monday that that decision is actually in the hands of the lenders themselves.

“While the extension of certain supports such as payment moratoria

Neil McDonnell, the chief executive of ISME, suggested that loan holidays on their own – even if permitted for business customers – are unlikely to be sufficient to get small businesses through this crisis.

“The likelihood is that this will prolong beyond the end of March and liquidity solutions are going to have to be pretty aggressive. You’re looking at an event that will at least be as disruptive as 2008, 2009 and will impact the SME community.”

Welfare payments

Meanwhile, for staff who are laid off, as many were on Monday as a result of the Government’s call to close down pubs and restaurants for at least two weeks, they will be able to recoup some money from the State.

Employees laid off temporarily, without pay, due to a reduction in business activity can apply to the Department of Employment Affairs and Social Protection for the Covid-19 pandemic unemployment payment.

This payment is available to all employees and self-employed people who have lost their jobs as a result of the work stoppages associated with the spread of the virus. After filling out a simple one-page application form, workers can get a flat rate payment of €203 per week for a period of six weeks.

You don’t need a public services card to receive the payment but if you have one, you can apply online: otherwise you have to post in the application form.

Workers who apply for this payment will also be required to apply for the normal jobseeker’s payments within this six-week period to ensure that they won’t be out of pocket after the six weeks. Jobseekers payment is a means-tested payment for people over 25 who can get a maximum of €203 per week. This can also be received by self employed people but the length of time they will be eligible for the payment will vary.

Employees who are put on to a shorter working week due to a reduction in business related to Covid-19 can apply for a short time work support payment. If, for example, your working week has been reduced from a five-day week to a three day week, you can get support for the other two days.

If you have lost out two days of work, you may be entitled to up to €81.20 (two fifths of the maximum weekly rate of jobseekers benefit of €203) for the two days you’re no longer working.

Illness benefit

Finally, there is also an illness benefit and supplementary welfare allowance to support people who are self-isolating. Under the new regime, the personal rate of illness benefit will increase form €203 to €305 per week for up to two weeks if a person is medically required to self-isolate, or for the duration of a person’s medically certified absence from work with a Covid-19 diagnosis.

The lobby group for the banking industry, the Banking and Payments Federation Ireland (BPFI), said it has engaged with the Department of Finance on behalf of the five main retail banks with a view to facilitating a scheme whereby social welfare payments can be made directly into a person’s bank account.