The banking and payments industry is fully committed to working with the Irish Government, the Central Bank of Ireland and other key stakeholders during this extraordinary time to provide financial support to customers affected by COVID-19.
We are committed to supporting individual customers, families, businesses and communities across the economy during this time. As the situation evolves, there will doubtless be a requirement to further address changing needs across the economy and the banking industry is ready to respond as quickly as it possibly can.
Many individuals and families are hugely concerned about how they will cope financially in the face of job losses, reduced hours, additional costs arising for childcare or elderly relatives. Businesses are equally dealing with significant challenges, trying to support employees, customers and suppliers.
How are banks supporting customers?
Our retail banks (AIB, Bank of Ireland, KBC, Permanent tsb and Ulster Bank), non-bank mortgage lenders (Finance Ireland and Dilosk/ICS Mortgages) and credit servicing firms (Investec Private Finance Ireland Ltd, Lapithus, Link Group, Mars Capital, Pepper and Start) have put in place measures to help personal customers and businesses (retail banks only).
The following are the key elements:
- A payment break for up to three months is available to both personal and business customers. This can be followed by ongoing reviews depending on the scale and extent of the situation
- Court proceedings are being adjourned for three months
- Various working capital facilities and supply-chain supports are available to businesses
What is a payment break?
Mortgages (for private dwellings and buy-to-lets), Personal Loans and Business Loans may be frozen for up to three months, to be followed by ongoing reviews depending on the scale and extent of the situation.
Payment breaks can take a number of forms depending on what best suits your specific situation.
1. ‘Moratorium’ Payment Break – generally this means that your full loan repayment is postponed for an agreed period of time so you do not pay any capital or interest.Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan – see How does a payment break operate?
2. ‘Interest Only’ Payment – you pay only the interest due on the loan during the agreed payment break. You do not pay any capital which means that your repayments will be less but also that your loan balance will not reduce during this period.Ordinarily, at the end of this period, loans return to full capital and interest payments. At the end of the agreed period, your future loan repayments will increase so that the loan is fully repaid within the original term of the loan – see How does a payment break operate?
Am I eligible for a payment break if my existing loan is in arrears?
Lenders are committed to supporting all borrowers – including borrowers who are already financially distressed and have had their loan restructured. You or your appointed adviser should contact your lender to see what further forbearance measures can be put in place.
How does a payment break operate?
A payment break effectively gives you breathing space – a period of time during which you do not have to make repayments on your loan. For example, if you take a mortgage payment break of up to three months, your lender will ordinarily spread your repayments over the remaining, outstanding term of the existing mortgage so that your mortgage is repaid within the original term.
Where you have the capacity to do so, another option which may suit you would be to pay the interest as it arises during the payment break.
Either way a payment break will give rise to higher repayments spread out over the remaining term of the loan.
The following illustrates how a payment break would work out in practice:
|Term Remaining||10 Years||15 Years||20 Years||25 Years||30 Years|
|Current Interest rate 3% (fixed 3 years)||3.00%||3.00%||3.00%||3.00%||3.00%|
|Next 3 months repayment||0||0||0||0||0|
|Future repayments (post Break)||994.00||705.00||564.00||481.00||427.00|
|Monthly Repayment Difference||29.00||15.00||10.00||7.00||6.00|
|Projected Balance in 3 months (with no break)||97,848.00||98,675.00||99,084.00||99,324.00||99,484.00|
|Revised Balance in 3 months (post the payment break)||100,756.00||100,756.00||100,756.00||100,756.00||100,756.00|
|Difference in balances||2,908.00||2,081.00||1,672.00||1,432.00||1,272.00|
|Total Amount Repayable (Current)||119,173.00||131,101.00||143,831.00||157,294.00||171,445.00|
|New amount repayable||119,727.00||131,745.00||144,563.00||158,109.00||172,347.00|
How do I apply for a payment break?
Not all customers will need a payment break and it is important that customers who can afford to continue making repayments should do so – that way debt is not built up unnecessarily.
Not all customers will need the same form or length of a payment break; and lenders may need to try to tailor something different depending on individual circumstances.
Contact your lender to request a payment break. Each lender is putting in place as streamlined and simplified an application process as possible; this may vary across lenders as between online, email, telephone or paper based. All lenders are dealing with a considerable increase in queries and applications at this time, so you may need to try a number of times to make contact.
Please understand that staff at all lenders are themselves working in very challenging circumstances and are doing their best to deal with all customer cases as quickly and efficiently as possible.
What happens at the end of a mortgage payment break?
At the end of a payment break your ongoing payments will be recalculated to include the interest charged during the payment break. These payments will be higher – reflecting the three missed payments and the interest charged – see How does a payment break operate?
Will my mortgage rate change as a result of using a payment break?
No, your mortgage rate will not change due to your availing of a payment break.
Will a repayment break affect my credit record?
Lenders are working with the regulator, the Central Bank of Ireland, to develop practical measures so that the credit record of those who avail of a payment break will not be adversely affected.
Helpful links for further information relating to Covid-19
- AIB – https://aib.ie/covid19/online-forms
- Bank of Ireland – https://www.bankofireland.com/app/uploads/assets/Covid19-Payment-Break-FAQ-2.pdf
- KBC – https://www.kbc.ie/news-and-press/latest-news-and-press-releases/covid-19-update-a-message-for-kbc-customers
- permanent tsb – https://www.permanenttsb.ie/about-us/notices/2020/march/covid-19/
- Ulster Bank – https://digital.ulsterbank.ie/personal/help-and-support/coronavirus.html
- Dilosk/ICS Mortgages – http://www.icsmortgages.ie/ics-mortgages-covid-19-information
- Finance Ireland – https://www.financeireland.ie/covid-19-announcement-business-as-usual/
- Mars Capital – https://www.marscapital.ie/media/17749/website-update-2003-002-.pdf
- Pepper – https://www.peppergroup.ie/covid-19-update
- Start – https://www.start.ie/Coronavirus.html