Rise in number of restructured mortgages for distressed borrowers this year

Despite a fall in the total number of all arrears, the increased number of restructured mortgages suggests that all is not well, experts said.

Senior policy adviser at Flac Paul Joyce.

New figures from the Central Bank show that mortgage arrears continues to be a running sore for households in Ireland, despite the payment breaks banks offered struggling borrowers during the worst of the Covid crisis.           

The number of households who required some sort of restructuring deal from their mortgage lender is continuing at a high level, with mortgage lenders agreeing over 4,570 so-called restructure arrangements with customers struggling to meet their monthly payments, the latest figures on residential mortgage arrears and repossessions show.

The number has increased by around 370 from the 4,200 restructured mortgage accounts in the previous quarter.  

Debt advisers and mortgage brokers have long warned that the type of restructuring deals favoured by banks, which include some sort of reduced payments and arrears capitalisation, are rarely in the financial interests of distressed mortgage borrowers, who end up paying more over the lifetime of the loan.                

Banks had nonetheless hailed the payment breaks they offered mortgaged households during the height of the Covid crisis last year, saying they had helped avert a second mortgage.  

The banks offered borrowers access to mortgage breaks for the first six months of the crisis by way of a simplified application process.     

The Central Bank figures also showed that the total number of all arrears fell by over almost 2,840 in the quarter, helped by fewer short-term arrear cases — but the increased number of restructured mortgages suggests that all is not well, experts said.       

One of the country's leading debt experts, Paul Joyce, who is also senior policy adviser at the Free Legal Advice Centres (Flac), said capitalisation of arrears as an arrangement is questionable. 

"By definition, it means paying more money, and capitalisation of arrears has the highest default rate," he said.  

He said the number of people who have struck reduced-repayment agreements suggests they are people who may have gotten into difficulty for the first time. 

Michael Dowling, a leading mortgage broker and personal insolvency practitioner, said that capitalisation under the restructured arrangements means that people pay more.

In reality, all of these arrangements suit the bank," Mr Dowling said. 

"We are in reality not dealing with the bigger problem of long-term arrears which keeps going up," Mr Dowling said, referring to the 5,416 accounts in arrears for over 10 years.

There is no country in the world that would accept a situation where 5,416 people are more than 10 years in arrears." 

He said that the now-years-old policy of the mainstream lenders selling their distressed mortgage loans to vulture funds is not working in the interest of customers "as opposed to the banks".

The Central Bank figures showed that at the end of March that 13% of all residential mortgages in the Republic were in the hands of "non-bank entities", but that 54% of all accounts in arrears for over a year were in the hands of the funds.