Mortgage arrears set to worsen until mid-2011

MORTGAGE arrears levels amongst Ulster Bank’s customer base are likely to worsen over the remainder of the year and are not expected to settle until the middle of 2011, at the earliest.

The bank’s first-half results, published yesterday, showed that 4.8% of its mortgage holders were in arrears as of the end of June. This percentage was up from 3.3% at the end of last year. While no breakdown – in terms of borrower profile – is available from the bank, the outlook is not positive. Ulster’s chief executive Cormac McCarthy – who is due to leave the company early next year after recently announcing his resignation – said yesterday that the situation concerning mortgage repayment arrears will continue to worsen into next year and will also take some time to ease, even if the country’s unemployment rate eases at the end of 2010, as is expected.

The rate of mortgage arrears – across the entire Irish retail banking sector – grew by 13% in the first three months of this year, the Financial Regulator recently said. Ulster Bank’s mortgage arm, First Active was one of the first lenders in Ireland to issue 100% mortgages to customers, when it was headed by Mr McCarthy. In terms of lending to business, meanwhile, Ulster said it is still very active – having approved 85% of the 15,000 or so loan applications from small and medium-sized enterprises (SMEs) it received during the first half of the year.