Mortgage to rent
How the growing mortgage to rent scheme in Ireland is helping struggling owners who are at risk of losing their homes
FINANCE
Image: Istock
David Hall
CEO, iCare Housing
Issue 68 | October 2023
Since its inception in 2012, the growth of Mortgage to Rent (MTR) in Ireland has made a major impact on combating homelessness.
MTR is a government scheme to help homeowners who are at risk of losing their home due to mortgage arrears. It lets homeowners in mortgage difficulty switch from owning their home to renting their home as social housing tenants. The scheme is overseen by the Department of Housing, Local Government & Heritage and is administered by the Housing Agency.
An Approved Housing Body (AHB) or a private company can buy the property once the homeowner in financial difficulty surrenders their interest in the property to their lender. AHBs are independent, not-for-profit housing providers that engage with local authorities throughout Ireland.
How it works
The defaulted borrower is initially means-tested to calculate rent. They will pay an income-based rent calculated under their local authority’s ‘Differential Rent Scheme’. If the tenant’s income increases then the rent increases, but if their income lessens the rent decreases. This means that their rent is always affordable.
If the tenant (ex-homeowner) returns to a stable financial situation, they have the option to buy back the property. This re-purchase price consists of the price paid by the AHB or private company, plus all repairs and professional fees and accumulated interest rates paid by iCare.
iCare role
iCare is an AHB and has played an integral part in the growth of the MTR sector since our incorporation as a Charity Limited by Guarantee in 2017 and the purchase of our first property in 2018. To date, iCare has purchased 481 properties through the MTR scheme.
At present, iCare has the most assigned cases by far of any AHB regarding MTR properties, in accordance with The Housing Agency 2023 Q2 report on Mortgage to Rent Statistics. This report shows a total of 2,150 properties have been completed since the MTR process started in 2012. iCare has more than 22% of this number. This is highly impressive, given the fact we acquired our first MTR property in November 2018.
Crucially, 6,194 people have benefitted from the MTR scheme, consisting of 3,418 adults and 2,776 children.
Although 2,150 properties have been completed, another 4,113 were ineligible or terminated during the process. Of these, 341 cases were not progressed because the household in question was deemed to be over or under-accommodated.
481
number of properties iCare has bought through the MTR scheme
2,150
properties have completed the MTR process since 2012
4,113
properties began the process but were deemed ineligible and terminated
6,194
people have benefitted from the MTR scheme to date
Room to improve
Although the MTR process is a great means of relief for those in mortgage arrears, the process can always be improved.
The bank selling as ‘mortgagee in possession’ often provides limited assistance to facilitate with property title or registration issues. Although this approach is well within their rights, the MTR process would be greatly improved if the lenders were compelled to assist with registration of the properties and assist with any issues that may arise during the conveyancing process. The hands-off approach from the lenders leads to many sales being terminated pre-closing.
Another area for improvement is the current approach to positive equity allowance. At present this is capped in three bands between €25,000, €30,000 and €35,000, depending what county you are living in. In our experience – and taking into account the cost-of-living crisis – these figures are way too low. In practice, the borrower/tenant is not paid a cash lump sum in these kind of amounts, following the purchase of the property by an AHB – particularly when the cost of repairs is taken into account. These thresholds should be greatly increased.
Mortgage to rent has been a lifeline to many in mortgage arrears. With the current mortgage interest rates and cost of living crisis, we must prepare to help more people who will find themselves with unsustainable mortgages.
“The hands-off approach from the lenders leads to many sales being terminated pre-closing.”
