Mortgage arrears to show 'a spike' when  24,000 struggling to pay are accounted for

Central Bank figures show there were 55,448 mortgage accounts facing some sort of arrears at the end of September, down from the June quarter and from September 2019
Mortgage arrears to show 'a spike' when  24,000 struggling to pay are accounted for

Central Bank figures show there were 55,448 mortgage accounts facing some sort of arrears at the end of September, down from the June quarter and from September 2019.

New Central Bank figures released on Thursday on the number of households facing mortgage arrears will inevitably show "a spike" when many of the 24,000 borrowers currently struggling to pay their home loans after the end of the Covid-19 payment breaks show up in the statistics, a leading broker has predicted. 

The Central Bank figures show there were 55,448 mortgage accounts facing some sort of arrears at the end of September, down from the June quarter and from September 2019.

However, Michael Dowling, who is a leading mortgage expert and has served on senior industry committees in the past, said there would be "a spike" in the numbers of households in arrears when the 24,000 accounts that needed additional support after the banks ended their six-month Covid-19 breaks in September come through in the system, next year.

The mortgage borrowers struggling to pay during the Covid-19 crisis will have to go through an overly complex process when they contact their bank lenders, Mr Dowling said. 

"There will be a spike. There is no doubt about that," the broker said. 

He said the system facing people in mortgage arrears should be revamped and made easier. 

Legacy of the crisis

The new figures from the Central Bank, although coming too early to capture the 24,000 accounts struggling to pay their home loans amid the Covid economic crisis nonetheless show the legacy of the crisis of 10 years ago, Mr Dowling said.

The number of arrears of between five to 10 years was down in the quarter and the year, to 11,489, and there was an increase in the number in arrears for over 10 years, to 5,014 accounts.

The Central Bank said the "non-bank entities", which include credit servicing firms and vulture funds that have played a large role in buying up soured mortgage loans from Irish banks in the fallout of the last financial crisis, hold 13% of all home loans but account for 57% of all those accounts which are in arrears for over two years. 

Irish regulators and the Government have long backed the banks selling their distressed mortgages as one way to lighten their books of non-performing loans.                   

Selling non-performing loans

Earlier this week, the European Commission also appeared to put its weight behind European banks selling non-performing loans built up during the Covid-19 crisis as a way to prevent a future build-up of soured loans "while maintaining high standards of consumer protection support". 

Rachel McGovern, director of financial services at Brokers Ireland, the business group for 1,225 brokers, said the latest Central Bank figures showed "there is a very long way to go in solving long-term mortgage arrears".

On the large number of distressed accounts held by the non-bank entities, Ms McGovern said the new owners could be "more likely to be open to negotiating a resolution with the borrower than would be the case if they were still held by banks".

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