Ireland mulls plan to write off €6bn of mortgages

IRELAND is considering plans to write off up to €6bn (£5.25bn) worth of mortgage debt in a bid to boost the economy, the country’s housing minister said yesterday.

A government committee is to consider a proposal to relieve households left in negative equity by a fall of around 50 per cent in residential property prices, junior minister Willie Penrose said.

He was referring to a proposal made earlier in the week by leading Irish economist Morgan Kelly, who estimated that a mortgage debt forgiveness scheme would cost between €5bn and €6bn.

“If the figure is as reasonable as he is saying, then it would be foolhardy for us not to examine it properly,” Penrose said.

“We have set up a group to examine possible solutions and it should look at the proposals from Morgan Kelly.”

Almost 90,000 mortgages were either in arrears or had been restructured, some 11 per cent of the total residential mortgage market, according to the last Central Bank figures released in May.

High repayments on mortgages taken out during a dramatic property bubble are a significant drag on the domestic economy, which is struggling to recover from one of the deepest recessions in the euro zone.

The government is to release a detailed three-year plan of cutbacks and tax increases in the autumn in a bid to reduce uncertainty that is seen as restraining consumer spending.

Ireland has committed to cutting its budget deficit to under three per cent of gross domestic product by 2015 from an estimated 10 per cent this year under an €85bn bailout deal.