The figures show that the Government’s economic strategy is in turmoil, as almost 100,000 home loans are now more than three months in arrears. They also sparked fears that banks will need further capitalisation, jeopardising our bailout exit in December.
“The key issue is whether the deteriorating picture leads to the banks requiring a further capital injection from the state, said Alan McQuaid, economist at Merrion Stockbrokers.
“If things continue to worsen, the banks could be in trouble.”
Senior banking officials admit the situation is likely to get worse, especially if this year’s budget is as harsh as feared.
The figures show 97,874 — one in eight — private residential mortgages were in arrears of more than 90 days to the end of June, while one in five buy-to-let mortgages were not performing. A further 80,000 mortgage accounts have been restructured by banks.
The Central Bank noted a 3.3% fall in the number of accounts less than 90 days in arrears, but the number of accounts in arrears of more than 360 days rose by 5.6%. This represents 12.7% of all such accounts, with a €18.6bn balance.
Banks have been told by the Central Bank to propose sustainable solutions for 20% of distressed borrowers by the end of June. They were also told to raise that to 50% by the end of 2013.
Frank Conway, of the Irish Financial Review, said banks have not done all they could to tame the growth in arrears. “The decision to not pass on the most recent ECB rate cut to standard variable rate mortgage holders resulted in monthly repayments remaining high.”
The Irish Banking Federation said the number of distressed customers being offered longer-term, sustainable resolutions can be expected to increase over the coming months.
Michael McGrath, Fianna Fáil’s finance spokesman, said the figures show the Government’s approach to dealing with the crisis is not working, and that the “sustainable solutions” being offered by banks are dictated by what is in the banks’ interests.
Sinn Féin’s finance spokesman Pearse Doherty said the figures show the banks are “running rings” around the Government.