Central Bank governor Patrick Honohan has said a corner "has clearly been turned" in solving Ireland’s mortgage debt crisis, but warned it will take a long time for the issue to be fully cured.
In an open letter to the chair of the Joint Oireachtas Finance Committee — Labour TD, Ciaran Lynch — he stated that roughly half of the 100,000 arrears cases processed have resulted in “sustainable payment restructures”.
Of some 108,304 cases of mortgages in arrears for 90 days or more, being assessed by the main lenders, sustainable solutions have been put to borrowers in 48,427 cases, he said.
“These solutions, prepared on a case-by-case basis, should bring those borrowers back on track — most of them with a revised and more affordable repayment schedule; including split mortgages, capitalisation of arrears, term extension, lower interest rate or a multi-layered period of reduced repayment,” Mr Honohan said, also noting that 32,544 agreements have been concluded and 88% of them are meeting the new terms.
He also claimed that “there is no firm evidence” of systematic over-optimism in the solutions designed by the banks.
“Therefore, there is reason to hope that a large majority of these solutions will be sustained,” he said. However, he said that it will be a long path.
“After a long period of persistent increase, the volume of arrears has been falling gradually throughout the year. Total arrears have fallen by almost 10% since mid-2013, and although the arrears in excess of 90 days are not falling by as much, the corner has clearly been turned. Process should accelerate gradually, but is slow: the situation will not be fully cured for quite some time.”
Recent data showed that the level of residential mortgages in arrears for more than 90 days fell for the third consecutive quarter.
Mr Honohan also urged lenders to redouble efforts to re-engage with non-cooperating borrowers, to try and ensure that avoidable losses of house ownership do not occur. He said that even in such cases, sustainable restructures may be possible. He noted that legal proceedings have begun against borrowers in 31,170 cases.
Mr Honohan rejected a committee recommendation that legal letters shouldn’t be included in the Central Bank’s list of sustainable solutions, saying that some cases will still inevitably require court action.
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