Borrowers facing fresh financial problems as the Government tightens Covid-19 restrictions are being urged to contact their lenders to secure relief on their loan obligations, even as industry-wide Covid-19 payment breaks have not been available since the end of September.
“Whether it’s a customer who is already on a payment break or a customer who now feels they need support, we are encouraging them to engage with the dedicated staff in the retail banks, who understand the challenges, and who are fully available to support and guide them,” said a spokeswoman for Banking & Payments Federation Ireland (BPFI).
“Banks fully understand that some customers, more than others, are experiencing serious financial challenges and need a solution to their individual circumstances, as well as advice and guidance during what is a difficult time. Every available resource is being dedicated to those customers who most need it, with 2,500 staff now working in the financial support units across the five retail banks.”
Outlets
Moving the Republic to Level-5 controls, where only essential retail outlets can remain open, will put 167,000 more people out of work, the Government has previously estimated. That is in addition to about 230,000 currently receiving Pandemic Unemployment Payments (PUP).
Payment breaks were introduced by the banks in the middle of March as the State headed towards lockdown, with European regulators subsequently issuing guidelines that allowed banks to avoid tipping the loans into non-performing status or marking the breaks as missed payments on borrowers’ credit records.
The European Banking Authority (EBA) decided last month against extending its guidelines beyond the end of September, saying that banks needed to return to offering relief on a "case-by-case" basis.
Banks can still offer payment breaks – or other solutions such as extending loan terms or allowing borrowers to go interest-only for a period – as they deal with those who are unable to return to regular payments. However, many borrowers will need deeper restructuring involving loan writedowns, particularly as the economy grapples with a second wave of the pandemic.
Any new payment breaks and other arrangements will be recorded on the Central Credit Registry – and banks will also have to start moving such loans into riskier categories on their own books.
Mortgages
There were 90,539 active payment breaks across Irish households and businesses as of early September, down 40 per cent from the end of June just before initial three-month payment holidays came to an end, according to Central Bank figures.
The level of mortgages subject to payment moratoriums dropped from 11.1 per cent of the total value of Irish home loans to 6.1 per cent during the period, while the ratio for small- to medium-sized businesses declined from 22.9 per cent 17.6 per cent.
Banks have reported that most borrowers who availed of extended, six-month payment freezes have been returning to regular payments as the period of relief has started to come to an end in recent weeks.
Those now most at risk of losing their jobs as a result of expected fresh restrictions were among the worst affected by the lockdown earlier this year and availed of payment break as a result.
Crisis
The fact that most mortgage holders have not sought payment holidays reflects the fact that many individuals who have been hardest hit by the crisis, such as lower-paid workers in retail and hospitality, are not homeowners, according to bankers and analysts.
The heightened restrictions "will obviously have material costs for the private sector as well in terms of business closures, so revenue forgone, adding further strain to already fragile finances for many companies and a hit to consumer confidence", said Goodbody Stockbrokers analyst Eamonn Hughes. "Further restrictions for the economy clearly isn't going to help business activity levels at the banks nor the [loan] impairments line."
Mr Hughes said that banks are set to strike a more cautious tone in upcoming trading statements from next week.
