Sunday Times - Question of Money - August 28

Posted by Jill Kerby on August 28 2011 @ 09:00

Son may move to Australia if mortgage not forgiven


AH writes from Waterford:  Is there a chance that the government will intervene to reduce mortgage debt for people who can show that they were missold their mortgage at the peak of the Celtic Tiger?


My son and his wife were given a mortgage offer – in writing, by their lender for €340,000 mortgage in early 2006.  They then went to a well known mortgage broker – they were following advice to shop around for the best rate – and the broker got what they were told was an even better deal of a €440,000 tracker mortgage from the same lender.  They took it but now due to my son losing his job (they also now have a baby) they are now unable to pay their loan.  My husband and I are helping them meet the mortgage, but the house is only worth €250,000, even if they could find a buyer and they are keen to emigrate to Australia where they both lived before the got married.  We don’t want them to emigrate, but unless they can reduce this debt, I can’t see how they can stay.



Your son’s case may be of interest to the New Beginning group of solicitors who are interested in taking legal action against the banks for reckless lending. Their website is www.newbeginning.ie.


Meanwhile, there has been a great deal of speculation recently about whether there will be a programme of mortgage debt forgiveness introduced by the government and banks and whether, as UCD economics professor Morgan Kelly has suggested, that there is already a €5-€6 billion write down built into the capitalisation of the banks.


With concerns about moral hazard risk still being expressed, many commentators are now suggesting that the case by case review of distressed mortgages will continue, with lenders providing some forbearance to homeowners who can cope over the course of a year with a revised repayment schedule, as laid down by the Revised Code of Conduct on Mortgage Arrears,


In some cases, the banks will undoubtedly agree to some debt forgiveness, perhaps if the alternative is for the mortgage holders to hand back the keys and decamp to the other side of the world. I’m not suggesting that this is what your son and his wife are about to do, but where there is a small shortfall/or arrears between the sale price of a house and its market price, it isn’t unthinkable to imagine that the lender will settle for the lower value.


If your son and daughter-in-law believe they have no choice but to seek work abroad, they should speak to their lender (and perhaps to New Beginnings) now and explore their options:

Can the house be rented and the mortgage repaid?  If they have no arrears (because you are helping them with repayments) but will if your support ends, can they seek the sanctuary of the Mortgage Arrears Code, qualify for more reasonable repayment conditions and STILL rent the property out if they find work in Australia? Can the house be sold and would the bank accept and write off a loss if they emigrate? If the bank declines to write off the shortfall could they afford to repay it once they find work in Australia? This would help safeguard their Irish credit record, should they want to return home some day.


German muscle

I am wondering about an advertisement from PNI Mortgages in the national press advising that if a person wanted to open a German bank account, that they would do the paperwork. The costs are €150 for a current account and €200 for current and deposit account.  I am interested and the set up costs are not an issue, but I am wondering who PNI mortgages are and more importantly who is the German bank and if they are regulated?



PNI Mortgages are based in Delgany, Co Wicklow and is regulated the Central Bank to sell mortgages.  The German current and deposit bank accounts they are offering to help people open, is with HypoVereinsbank, a German subsidiary of the largest Italian bank Unicredit. You will need the services of a notary to complete the paperwork. I didn’t find PNI’s website particularly helpful, but it does provide a telephone helpline.


The e-banking account comes with a HVP Maestro card, with which you can withdraw funds. Variable rate interest of between 0.25% and 1.05% is paid, but the latter only on sums of €25,000 or more.


You should know that UniCredit, the Italian parent bank of HypoVereinsbank was one of the banks, along with the giant Societe Generale of France that the markets sold off heavily earlier this month over concerns about the vast amounts of sovereign debt they are carrying. Since the end of February, Unicredit’s share price has fallen from about €2 to just 89 cent at time of writing, which reminds me of the huge fall in bank shares prices that the Irish banks experienced throughout 2007 and 2008.


Anyone thinking about opening an account in another country should always choose as financially sound bank as possible and only deposit up to the sum guaranteed by the bank’s deposit guarantee scheme.


The third estate

GP writes from Carlow: My sister died leaving an estate worth €895,000 to be divided equally between myself and my two surviving sisters. I was the nominee for her credit union account and received from the CU a cheque for the €14,700 in her account plus a Death Grant of €1,300 for a total of €16,000.  I cashed the cheque, but later her solicitor wrote to me and asked me to return the Death Grant portion saying this was to go to the estate and not to the nominee.  (The Credit Union manager said he never heard of this before.)  I returned the €1,300 to the solicitor and this was included in the estate which was divided equally between the three of us.  When the solicitor returned my IT38 Form he had included in it the funds that were nominated to me in the Credit Union as well as my share (1/3) of the estate.  Probate tax was paid on the total amount of these.  After reading Larry Breen's recent article in your pages about how Credit Union accounts, up to a specified limit, are not subject to normal probate rules but are paid out based on a member's signed nomination I now think that I should have paid Capital Gains Tax on the money that was nominated to me in the Credit Union some of which I could have written off against share losses. I also think I was entitled, as nominee to the Death Grant of €1,300.


First, the tax that you and your sisters have paid on your inheritance is capital acquisition tax (CAT), not probate tax, which no longer exists, though there is a probate process.

According to Sandra Gannon of TAB Taxation Services in Dublin, the money nominated to you by your sister that was in her credit union account may be described as ‘shares’ by the credit union, but it is considered savings for inheritance tax purposes and is subject to CAT, not CGT.  As for whether you had to share the credit union savings insurance with your sisters, you should have this clarified in writing by your Revenue Inspector of Taxes and then, if applicable, ask your sisters to refund the amounts they received, less the CAT. 






0 comment(s)

Leave a comment

Subscribe to Blog