Homeowners’ debts still growing

THE home loans of at least 18,000 “restructured” mortgage holders continue to increase as they struggle to pay their debts, it emerged yesterday.

And consumers are also scrambling to keep up repayments on other loans as well as paying off credit card debt.

The Central Bank of Ireland’s director of consumer protection, Bernard Sheridan, said yesterday that while mortgage arrears has become one of the biggest issues facing the country, data on mortgage loan arrears “does not show the full extent of the problem”.

Mr Sheridan said the Central Bank’s quarterly data on arrears and repossessions show that mortgage accounts in arrears over 90 days have almost doubled since September 2009 rising from over 26,000 accounts to almost 50,000 accounts in March 2011.

“Data on arrears does not show the full extent of the problem. We now also publish data on restructured loans which show that over 86,000 accounts are either in arrears or are restructured. It is worth noting that over half of all restructured accounts are either paying interest only or less than full interest only, which means that outstanding debt is not decreasing for those families,” he said.

Mr Sheridan said while that mortgage debt represents the biggest part of household debt there are also problems in other areas.

“We know consumers are struggling to keep up repayments on other loans as well as paying off credit card debt,” he added.

The director of consumer protection admitted he was surprised that lenders did not give consumers any notice when they recently started to increase the variable interest rates on mortgages.

“In the current environment, many borrowers have limited capacity to absorb higher costs and therefore would need time to plan for such an event,” he said.

“Lenders need to think through the consequences of their decisions on their customers before making changes. We informed all lenders that in future they must give at least one month’s notice of any increase in their standard variable rates. The Consumer Credit Directive also requires advance notice to be given of any changes in rates on consumer loans.”

Mr Sheridan said the bank’s focus must be to try to ensure that lenders behave responsibly in working with their customers, both at the time of provision of credit and also when the borrowers circumstances change.