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Rate of increase in mortgage arrears slows

Mortgage losses among Irish banks are showing tentative signs of stabilisation with the latest figures from the Central Bank showing the rate of increase in mortgage arrears at its lowest level since the first three months of 2011.

Figures from the Central Bank for the end of June 2012 show that 83,251 — 10.9% of total mortgages — were in arrears of over 90 days, which is an increase on the 77,630 mortgages in arrears for over 90 days recorded at the end of March this year.

The number of mortgages in arrears for over 180 days at the end of June was 65,698, or 8.6% of the total stock of mortgages, which was also an increase on the 59,437 mortgages in arrears for over 180 days at the end of March.

There figures also show that 45,165 mortgages were in arrears of 90 days or less at the end of the second quarter, which is a slight improvement on the 46,284 mortgages in arrears for less than 90 days at the end of the first quarter.

"While the number of accounts in arrears of more than 90 days increased by 7.2% during the second quarter, the total value of arrears outstanding on these accounts increased by 11%," said the report.

Furthermore, 84,941 mortgages have been classified as restructured at the end of June, which was a 6.6% increase on the 79,712 restructured at the end of March. Of the total restructured mortgages, 44,720 had fallen back into arrears of more and less than 90 days. The remaining 40,221 were sticking to the restructured terms.

Restructuring took the form of interest only payments; a reduction in the payment amount; temporary deferral of payment; extending the term of the mortgage; and, capitalising arrears amounts and related interests.

The Central Bank says that restructured accounts in arrears, "include accounts that were in arrears prior to restructuring where the arrears balance has not yet been eliminated, as well as accounts that are in arrears on the current restructuring arrangement."

"Arrangements whereby at least the interest only portion of the mortgage is required to be met accounted for just over half of all restructure type — 53%," said the report.

Davy Stockbroker’s economist Conall McCoille notes that 14.7% of the total value of mortgages are now in arrears of 90 days or more. Mr McCoille recently issued a research paper which forecast that 90-day mortgage arrears would peak at 16.5% of the total value of mortgages in 2013.

"So [the latest] release reinforces our view that a slowly stabilising labour market should reduce mortgage arrears formation. That said, the true test of our forecasts will be in 2013, when we expect the arrears rate to peak. Also where mortgage arrears will eventually peak will depend on the implementation of the Personal Insolvency Regime and macroeconomic developments," said Mr McCoille. "However, [this] release is something of a relief, providing tentative signs that the increase in mortgage arrears is beginning to slow."