Matthew Elderfield: 'cautious'

The Financial Regulator is preventing lenders from offering products that could help homeowners in negative equity sell their homes and refinance part of their old homeloan in a new mortgage.

The regulator is maintaining a "cautious" stance on negative equity mortgages pending the conclusion of a review prompted by news last June that a handful of banks and building societies were preparing to market the products.

It is understood regulatory officials believe the loans are inappropriate to the Irish market. They are particularly worried that Irish borrowers would be willing to take on unaffordable levels of new debt to get out of negative equity. The regulator also believes these mortgages, which can provide funding as high as 125% of a property's value, do not fit the strategy or risk profile of the institutions under its watch, all of which have lost large sums on bad debts.

In July the regulator wrote to all 21 mortgage lenders in Ireland instructing them to stop writing the mortgages. Subprime lenders were banned outright from selling the product, while mainstream lenders were told to seek individual approval before issuing any more of the loans.

A spokeswoman said all the lenders had replied to the memo and the "vast majority" were not even offering the loans. But the regulator is not relaxing its stance.

"We have concerns about the negative effects of such a product," the spokeswoman said in a statement.