Not enough houses to cater for ‘large scale repossessions’, says broker

There is not enough social housing to allow for “widespread repossessions” and the new mortgage-to-rent scheme offers the best way of tackling the huge backlog in mortgage arrears, Davy Stockbrokers has said.

“The revised mortgage-to-rent scheme offers a full debt write-off and security of tenure for borrowers. Banks can reduce their most problematic non-performing loans and also avoid legal costs,” meaning a “win-win solution” for both distressed borrowers and lenders, according to Davy.

Saying there were 33,447 residential accounts in long-term arrears, the broker said there isn’t enough social housing to deal with the prospect of “widespread repossessions”.

There is a waiting list of 91,600 of four and a half years for social housing, it said. Using mortgage-to-rent deals could “help reduce up to one-third of non-forborne home-owner cases”, it said.

The European Commission earlier this week recommended the Government encourage banks to reduce a large number of non- performing loans through deals “that involve write-off for viable businesses and households”.

It is believed to be the first time the Commission has urged deals involving writing off unsustainable mortgage debt.

Separately, the Central Bank said only a small share of new mortgage lending last year took place under the exemptions, including negative equity, switcher and mortgage restructuring loans, to its mortgage control rules.

Its overview of its so-called Macroprudential Measures showed the largest five mortgage lenders advanced 29,893 loans which were worth €5.7bn in 2016.

“Profiling the borrowers in the market, the loan size, property value and income for second and subsequent buyers (SSB) were all higher than for first-time buyers (FTB) in 2016.

There was also a higher proportion of couples among the SSB group (72%), while single borrowers featured more prominently among FTBs (56%),” according to the research.

The Central Bank loosened its mortgage lending rules from the start of the year.

Allowing for exemptions, the rules allow banks to lend mortgages depending on the loan-to-value of the property and loan-to-income of the borrower.