Mortgage arrears rise by 3% following series of interest rate hikes

Despite a year of rate hikes, the number of homeowners in long-term arrears fell by more than 4,000 in the quarter

Among non-banks, a greater proportion of private dwelling accounts held are in longer-term arrears when compared to banks, with such entities holding 76 per cent of all accounts in arrears over one year.

The number of homeowners who have slipped into arrears rose by 3% in the first three months of 2022, rising by 1,430 accounts, new figures from the Central Bank of Ireland show.

However, the Central Bank pointed out that about 1,300 of these were down to a “reclassification effect” arising from the withdrawal of KBC and Ulster Bank from the Irish market and the impact this has had on the transfer of loans from one bank to another.

According to the regulator, there were 716,560 private residential mortgage accounts for principal dwellings held in the Republic at the end of March, with a value of just under €100bn. Of this, 48,760 accounts were in arrears, rising by 130 once the reclassification effect is taken into consideration.

In the period, accounts in arrears over 90 days fell by 1.8%, with the number of private dwellings in long-term arrears down by more than 4,000.

Of the private dwelling accounts in arrears, some 5,608 accounts are currently part of a legal process, representing around 12%, with 40% in the legal system for more than five years.

Latest Central Bank data also reported a drop in repossessions, falling from 486 to 458 in the first three months of 2023.

On Thursday, the European Central Bank enacted an eighth interest rate hike in less than one year, bringing its main refinancing rate to 4% as part of an aggressive campaign to tackle high inflation.

The decision will impact more than 200,000 tracker mortgages, whose rates change in accordance with monetary policy decisions. Speaking on the increase, Darragh Cassidy of Bonkers.ie said people on tracker mortgages will immediately see the rate increases reflected in their payments.

“In money terms, if you have €100,000 remaining on your tracker your repayments will go up by around another €12 or €13 a month. If you have €200,000 outstanding it’ll be around €25 more,” he said.

A total of 39 homes were taken into possession by lenders in the quarter, according to the Central Bank, with 22 of these properties repossessed on foot of a court order, while 17 were voluntarily surrendered or abandoned.

Non bank entities accounted for 16% of the total stock of outstanding private dwellings mortgage accounts outstanding, with some 18% of all private dwelling accounts in arrears over 90 days held by non-banks.

Among non-banks, a greater proportion of private dwelling accounts held are in longer-term arrears when compared to banks, with such entities holding 76 per cent of all accounts in arrears over one year.

Despite decrease across private dwellings, 10,454 buy-to-let accounts were in arrears at the end of March, an increase of 113 accounts over the quarter.

Of the total buy-to-let stock, 7,848 accounts, or 11%, were in arrears of more than 90 days, with buy-to-let accounts in arrears over one year numbering 6,635 or 9% of all such accounts. The outstanding balance on these accounts was €1.9bn at the end of March, reflecting 17% of the total outstanding balance on all buy-to-let accounts.