NEARLY HALF of all Irish adults say they have less than €100 to spend at the end of each month, having paid their bills. That is the stark finding from the latest quarterly income survey commissioned by the Irish League of Credit Unions. The survey was conducted against the backdrop of a contracting economy, high unemployment and high levels of personal debt. The findings show how a long and deep economic recession – since 2008 – continues to take a heavy financial toll on households and others. Living standards have fallen and financial hardship has steadily increased. For many, it has become the worst of times; in particular, for those who are weighed down by high levels of personal debt, and who now find that they are carrying a financial burden they cannot discharge.
Almost two out of three people say they are worse off than a year ago. As the survey shows, mortgage and rent payments are the biggest items in the weekly or monthly household budgets. National house prices have halved from their peak, and contributed to a sharp increase in mortgage arrears. By the end of 2011, almost one in 10 owner-occupier mortgages were more than 90 days in arrears on payments. And that arrears number is expected to rise further in 2012 unless the Government forces the banks to engage more meaningfully on some degree of debt forgiveness.
There are, however, some encouraging developments for owner occupiers in serious difficulty on their loan repayments. The Government has published a draft outline of a Bill to reform the insolvency laws, which should be passed in a matter of months. This measure would reduce the discharge period from bankruptcy from 12 to three years, and also make it easier for borrowers and lenders – via voluntary out-of-court arrangements – to reach agreement on outstanding debt issues. And for those in negative equity, where their outstanding mortgage debt is greater than the value of their home, some modest help is also in sight. Although 40 per cent of owner-occupiers are in negative equity, most (93 per cent) are meeting their loan repayments. The Central Bank proposes to make it easier for those in that position – but who need to move home and can afford to do so – to obtain negative equity mortgages. Likewise, changes to the rent supplement scheme, with the introduction of maximum rent limits should benefit taxpayers, tenants and the economy. The scheme is designed to provide short-term income support – mainly to those who are unemployed or working part-time – to help them secure rented private accommodation.
Minister for Social Protection Joan Burton has said changes now envisaged in the rent supplement scheme – which costs about €500 million a year – will also help to remove some of the barriers that discourage those on welfare from moving back into work. Those who receive rent support will not lose it all on finding a job. Instead, they would pay a differential rent, a percentage of either their welfare benefit, or their pay.
One small step, among the many needed urgently to get the economy moving again.