Mortgage arrears data indicates over 10% not able to pay

ANALYSIS: The Coalition may have to compel banks to resolve an increasingly pressing problem

THE CONSEQUENCES of “kicking the can down the road” were laid bare yesterday when the Central Bank published its latest statistics on mortgage arrears.

They paint a very bleak picture and show the number of people who have fallen 90 days or more behind in the repayments continuing to climb dramatically

There are now 77,630 homeowners, or 10.2 per cent of the residential mortgage market, who are unable to pay their mortgage and are in arrears of 90 days or more. In the United Kingdom the percentage is just 2.5 per cent.

When the number of mortgages in arrears is combined with those which have had to be restructured in some way, the percentage in difficulty climbs to 15.2 per cent of the residential market, up from 14 per cent at the end of last year.

That is not even the worst of it. When the value of the mortgages which are in arrears or have been restructured as opposed to the actual number of mortgages involved is taken into account, the picture is grimmer still.

At the end of March there was €21.7 billion in mortgage debt which was either in arrears of more than 90 days or had been restructured. This equates to 19.2 per cent of residential mortgage debt. At the end of December this figure was 17.7 per cent. Three months earlier it was 16 per cent.

Another worrying statistic to emerge is that while those falling into short-term arrears for the first time has slowed – the number of cases of short-term arrears is only up about 300 on the last three months of 2011 – the numbers who have moved into the long term arrears category is up 6,000. If the problem of long-term arrears is worsening it suggests the banks’ policy of forbearance is not working.

While the Government has established a specific Cabinet sub-committee to deal with personal debt and the preparation of complex personal insolvency legislation is on the way, albeit two months behind schedule, critics say nothing concrete has happened yet and consumers are paying the price.

The Central Bank knows forbearance is not the answer and is pushing the banks to do more to deal with the problem of long-term and unsustainable debt.

There are a range of proposals in the pipeline including schemes which will allow those struggling to keep on top of their debts to freeze some of their mortgage for long periods without penalty; other schemes will allow people surrender their homes to banks but continue to live in them while others will be allowed sell up and move on without carrying huge debts accrued as a result of negative equity with them.

The Irish Banking Federation and Government sources drew comfort that the numbers falling into arrears for the first time are steadying, the reality is the rise in the number of people in arrears is set to accelerate for some time to come as more pressure comes to bear on personal savings and high unemployment makes it impossible for those already in arrears to escape their mounting debts.

"Strong anecdotal evidence suggests that an increasing percentage of mortgage holders have either used up personal savings or the goodwill of family members in order to keep their mortgage repayments current," said Frank Conway, director at moneycoach.ie

Ciarán Phelan of the Irish Brokers Association agreed that the problem was worse and he said banks needed to move away from short-term forbearance and deal with long-term arrears.

Taoiseach Enda Kenny said this week he “would like to think that the banks themselves would show greater urgency in sitting down with the borrowers”.

Rather than this wishful thinking, the Government would perhaps be better off compelling the banks to deal with the issue in a more effective fashion.