Personal debt falls €563m in Q2

LATEST figures from the Central Bank show personal debt fell by €563 million in the second quarter of this year while mortgage debt was down €194m.

The bank’s figures show that overall the outstanding debt owed by private individuals and businesses was down 1.2% or €4.7 billion in Q2 of this year.

The bank said this was mainly due to write-downs of bad loans.

Yesterday Anne Breen, head of property research at Standard Life Investments said the Irish property market has still “some way to go” before reaching its low.

“The unsustainable peak in values reached in the Irish market compared with the rest of Europe mean its correction can be expected to be sharper and deeper than its European peers.

“Although there are signs of revival in the real estate market, with yields becoming more stable attracting international attention, capital values will continue to be impacted by rental declines going forward. We don’t expect the market to bottom until 2011,” she said.

Ireland’s banks face loan losses of about €35bn following the property bubble burst, the International Monetary Fund has said.

House prices have fallen 22% from their January 2007 peak, while banks have applied tougher conditions on loans as risks increase.

The decline “is mainly due to write-downs of existing credit arrangements and increased provisions for bad and doubtful debts”, the Central Bank said.

In the year to the end of Q2, personal sector credit was broadly unchanged, as falls in non-mortgage lending have been largely offset by the increase in residential mortgages outstanding over the year.

Meanwhile, Irish residential mortgage-backed bond delinquencies increased on expectations for a prolonged recession, Moody’s Investors Service said in a report.

The weighted average 90 days-plus delinquency trend reached 2.3% in Irish prime RMBS transactions in the second quarter, up from 1% in the year-earlier period, the report said.

Moody’s also notes that the weighted-average 360+ days delinquency trend stood at 0.37% at the end of quarter two 2009, which compares with 0.14% a year ago. Seven transactions recorded more than 0.60% of 360+ days delinquencies, while three showed more than 1.00%.

“The 360+ days delinquency trend is a lagging indicator, which means the full effects of the strong economic deterioration may not yet be fully reflected,” said the report’s co-author.