Rise in customers falling into mortgage arrears

Bank of Ireland has reported a slowing in the rate of mortgage arrears increases among its customer base, but said more people are still falling behind in their home loan repayments.

The bank said yesterday — as part of its first-half performance roundup — that 8.33% of its total residential mortgage book was in arrears for 90 days or more, as of the end of June; as opposed to 6.57% as of the end of December.

Nearly 14% of the bank’s buy-to-let mortgage book is currently in arrears, next to just 7% of its owner-occupier book. That owner-occupier figure is up from 5.6% at the end of December, but is still well below the 10.2% industry average.

But mortgages covering those looking to buy properties in order to rent them out remains, by far, the most distressed element of the bank’s total mortgage book. In total, however, yesterday’s information showed that as much as €23.1bn — or 84% — of Bank of Ireland’s complete Irish mortgage book is still in positive territory, remaining under the classification of “neither past due nor impaired”.

“The numbers of customers moving into arrears categories has continued to increase — partially reflecting a considerable number of our buy-to-let customers moving from interest-only to full amortisation. However, reflecting some stabilisation in the economy, and the impact of our own initiatives, the rate of increase reduced during the first half of 2012 and we expect this trend to continue,” chief executive Richie Boucher said.

Bank of Ireland yesterday reported a total pre-tax loss figure of €1.25bn for the first six months of this year, up from €556m for the corresponding period in 2011.

Mr Boucher said the bank’s preference remains trying to reach payment restructuring agreements with customers in arrears, but that residential house repossessions would likely continue where necessary. Bank of Ireland undertook 58 house repossessions during the first six months of this year; only eight more than during the same period last year.

The bank’s chief financial officer, Andrew Keating, meanwhile said that Irish house prices are likely to fall to an average of 55% below their 2007 peak before bottoming out.

Regarding recent reports of commercial mortgage holders being refunded after paying more interest than seemingly necessary after rate reductions, the bank said it would not be provisioning for this as it wasn’t a huge problem; adding that commercial mortgages are priced against market-related rates, which change on an ongoing basis; and customers may request that payments be reduced.


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