Central Bank must ‘face up’ to arrears crisis

The “staggering” amount of mortgage holders in arrears is a problem the Central Bank needs to get to grips with, says a brokers body.

Central Bank must ‘face up’ to arrears crisis

Pádraig Hoare

The “staggering” amount of mortgage holders in arrears is a problem the Central Bank needs to get to grips with, says a brokers body.

Accounts over two years in arrears — seen by mortgage campaigners as the cohort most vulnerable to losing their homes — now comprise 41% of all cases, said the Central Bank.

While the number of accounts in arrears over two years, or 720 days, declined by 1% in the first quarter of 2017, such cases represent 90% of arrears balances outstanding at €2.6bn, it said.

Storm Emma in March, when much of the country’s services shut down due to snow, was blamed by the Central Bank for the overall increase in the number of accounts up to 90 days in arrears in the first quarter of 2018, compared with the end of December 2017.

The number of accounts in arrears of up to 90 days rose by 5% to 23,295 at the end of March, said the regulator.

Paul Joyce, a senior policy analyst with Free Legal Advice Centres, said the data leaves a lot of questions unanswered.

He said blaming Storm Emma for mortgage accounts going into arrears was “strange, to say the least”.

“What has Storm Emma got to do with it? It is a big, big leap to say 5% of accounts in arrears up to 90 days is purely down to the storm. It seems to be amateur hour.”

Mr Joyce said long-term arrears remain a “huge concern”, adding that looking deeper into the data, it appeared an extra 1,200 accounts had been given over to vulture funds.

Despite “some improvement” in mortgage arrears figures, most stubborn arrears are still not being faced up to, says Brokers Ireland.

The body’s director of financial services, Rachel McGovern said: “Those in arrears for over 720 days constitute 41% of the numbers of arrears cases but a staggering 90% of the amount of total arrears outstanding, a figure that has changed little over recent years.

“There is still a huge element of extend and pretend going on. These are people who are not being facilitated with solutions, they are in a bind and unable to get on with their lives.”

Ms McGovern said the Central Bank “needs to face up to the situation” and enable lenders find “real solutions to this terrible dilemma”.

“Almost a decade on from the financial crisis there is a great deal of the devastation felt by individuals and families still unresolved.”

The Central Bank’s amendments to the Consumer Protection Code to assist mortgage holders in switching were given a cautious welcome.

The watchdog said a standardised mortgage switching information for consumers would be introduced, while a number of lenders were ordered to withdraw or amend advertisements relating to mortgage incentives.

For fixed-rate mortgages, lenders are required to inform customers at least 60 days in advance that they are about to come off their fixed rate and provide details of the new rate applicable from the expiry date.

For variable-rate mortgages other than on a tracker rate, lenders will be required to notify consumers every year as to whether they can move to a cheaper interest rate as a result of a move in their loan-to-value interest rate band.

A completed mortgage application will have to be acknowledged within three business days, with a decision within 10 business days.

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