High Court Warehousing Judgement

Background of the Callaghan Case

The couple reside in a 3 bedroom semi-detached property with their 3 young children.  The couple had a mortgage with KBC for €285,647 for their family home which was valued at just €105,000.

PIP’s Proposal

The PIP proposed a reduced interest rate of 2.5% from 4.5% for the period of the PIA and thereafter reverts to 4.5% for the remainder of the mortgage.  The mortgage to be extended by 6 years until Mr. Callaghan reached 70 years of age and a write off of €165,647.

KBC’s Proposal

The bank proposed  to split the debt into an active and warehoused mortgage of €135,000 each and a write off of €15,647.  As part of the proposal the warehoused mortgage would carry 0% interest and the couple could reside in the home for the rest of their lives.

Baker Ruling

The Judge ruled in favour of the couple and rejected the warehousing of €135,000 as the warehoused is not proportionate to, or reasonably derived from, the current income and capital assets, or any future ascertainable means.  The Judge confirmed that warehousing of a mortgage debt is permissible in principle, but it was not reasonable in the circumstances of this case.

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