Ireland's repossession rate is 'uncharacteristically low'

The level of repossessions in the Republic is “uncharacteristically low” but banks should soon be able to “move forward” on tackling problem mortgages, the secretary general of the Department of Finance John Moran said today.

The  Public Accounts Committee heard today the Republic has a repossession rate of about 0.25 per cent of home loans, compared to 3 per cent in the UK and up to 5 per cent in the US.

“It’s surprising to us that there are so few repossessions in the system at the moment, given the extent of the crisis,” Mr Moran said.

It would be “typical” to see a greater incidence of repossession, either through voluntary surrender of a home or through the court system, where the economics of paying a mortgage no longer work, he added.

The Central Bank’s latest figures on mortgage arrears, issued this morning, show that more than 23,500 home loans are in arrears of more than 720 days.

The  figures show the rate of  increase in arrears rose at the slowest pace in three years in the fourth quarter of 2012. The data also show home loans that were less than 90 days in arrears fell by more than 1 per cent, giving rise to fresh optimism that the situation may be easing. Almost 12 per cent of private residential loans were three months behind in payments at the end of December, rising from 11.5 per cent in September. However, the 3.4 per cent quarter on quarter rise was the slowest since 2009.

Mr Moran said a “large range of different options” were needed to solve the problem but noted that a workable system will soon be in place as the Department of Justice moves on closing a legal loophole preventing many repossessions and the new personal insolvency service prepares to launch.

When asked by Independent TD Shane Ross if a “free for all” in repossessions could be expected, Mr Moran acknowledged that the rate could be expected to rise but noted that “we are starting from a base which is uncharacteristically low”.

“Maybe we will move to those levels,” said Mr Moran, referring to repossession rates in the US and the UK. “We have had as serious a crisis as everybody else.”

He said full information on borrowers in difficulty was still unavailable, thus making predictions on the likely levels of repossessions unreliable.

The Irish Banking Federation (IBF) welcomed the evidence of a continued slowdown in the pace of arrears. But it noted the continued rise in the overall level of arrears.

"This should come as no surprise given the difficult economic conditions faced by a sizeable number of customers. Nor is it unexpected that the number of accounts in long-term arrears over 720 days has increased, as increases in new mortgage arrears in previous periods will be followed some time later by a deterioration in the level of longer-term arrears," the IBF said.

"A considerable challenge lies ahead of course in dealing with the overall stock of arrears and banks are fully committed to that challenge. However, they need the full range of tools to be fully effective which is why urgent action on the Justice Dunne judgment, an immediate review of the Code of Conduct on Mortgage Arrears, modernisation of the legal process in line with other jurisdictions and clear policy support for the prioritisation of secured over unsecured debt are so important."

There is a total of 792,096 private residential mortgage accounts in Ireland with a value of €110.8 billion, with 150,344 residential mortgage accounts for buy-to-let properties worth €31.1 billion.

However, repossessions of properties in arrears were still “unsustainably low”, Davy analysts said. “The most effective measures in dealing with mortgages in arrears, repossession and debt write-downs, remain negligible,” Conal Mac Coille and David McNamara wrote. Legal proceedings were issued on 238 mortgages in the last quarter of the year.