Fears at ‘painfully slow’ pace of falling mortgage arrears
The group’s policy head, Paul Joyce, was commenting on the latest Central Bank figures which showed a small fall of 1,217 to almost 72,490 in borrowers who face some sort of arrears in paying their mortgages at the end of September from the previous quarter.
The figures still mean one in 10 of all residential mortgages are behind in repaying their home loans.
The latest statistics show:
- 39,160 households are in arrears for more than a year;
- 33,447 households are in arrears for over two years;
- Accounts in arrears over 720 days now constitute 44% of all arrears, totalling just under €8.4bn.
Irish banks, along with those in Italy, are under particular pressure from the ECB to clean up their loan books of distressed property loans.
However, Mr Joyce said the decline of 7,000 in accounts in arrears from last year “is painfully slow”. He also said the figures gave no clue to how unregulated vulture funds were dealing with distressed borrowers.
And, he said, in light of the tracker mortgage arrears scandal, it was time for the Central Bank to name and identify all lenders and their dealings with arrears and distressed borrowers.
“The figures do not tell us whether certain credit institutions bring legal proceedings quicker than others,” said Mr Joyce. “They don’t tell anything. And we do not know exactly how many repossession cases are in the courts.
The numbers of arrears for over 90 days, at 6.9% of all mortgage accounts, also give an artificially positive picture, he said.
“And given the ECB context, it doesn’t take into account the huge number of restructuring,” he said, adding the high level of household indebtedness will weigh on the economy when the ECB starts to hike interest rates in the coming years.
“We want the lenders to write down debt. Writing down the current mortgage to current market value should be explored in every case. Instead, we get a long, drawn-out process and you wonder whether it is doing the banks any good.
“There is fear that the main banks will sell their more troubled mortgage accounts.”
Mr Joyce added that this amounted to “shuffling bits of paper” with no benefit to borrowers.
The number of restructured accounts at the end of September stood at 119,070, down by 977 accounts in the quarter, according to the Central Bank figures.
Such restructured home loans include:
- Borrowers agreeing with their lenders to pay only the interest on the mortgage and not paying down the capital;
- Deferring paying interest payments;
- Reduced payments;
- Agreeing temporary and permanent moratoriums;
- Striking agreement over split mortgages
The number of restructured accounts in arrears for over 720 days — borrowers who have had some sort of adjustment in the repayment agreements — fell by 545 to 31,624 in the quarter but there is no information on the number of accounts who were subject to repossession, Mr Joyce said.
The figures also show that, despite an improvement of about 500 accounts in the quarter meeting the terms of their restructured mortgages, 12.7% of all restructured accounts were failing.
Restructured mortgages are supposed to be permanent and sustainable and the high failure rates have long worried debt and mortgage experts.
“Some 15,651 [accounts] were not meeting the terms of their arrangements at the end of quarter two and that was down to 15,121 at the end of the third quarter,” said Mr Joyce. “And we have a large number of capitalisation of arrears.”
He said there was some “small evidence” of unregulated loan lenders being more willing to bring legal proceedings.
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