Mortgage arrears fall by more than 3% in third quarter

Mortgage arrears fell by 3.1 per cent in the third quarter of 2016, the 13th consecutive quarter of decline, new figures from the Central Bank show.

However, 11 per cent of mortgages remain in arrears, and arrears on buy-to-let mortgages where a receiver has been appointed actually increased by 5.4 per cent in the quarter.

According to figures from the Central Bank, 79,562, or 11 per cent of all mortgages, were in arrears as of the of the third quarter, a decline of 3.1 per cent relative to Q2 2016.

The decline is behind expectations, however, as Merrion Stockbrokers had predicted the total would have fallen to 78,000 by the end of September “as the economy continues to recover and household incomes improve”.

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Long-term arrears also fell, with mortgages in arrears more than 90 days at end-September down by 2.1 per cent to 56,350, the 12th consecutive decline. Mortgages in arrears of more than 720 days also fell in Q3, down by 1.2 per cent, the fifth consecutive decline.

Court order

According to the figures, some 421 properties in residential ownership were taken into possession by lenders during the quarter, of which 141 were repossessed on foot of a court order, while the remaining 280 were voluntarily surrendered or abandoned. Some 400 properties were disposed of.

Buy-to-let (BTL) mortgage accounts in arrears more than 90 days decreased by 2.4 per cent during the third quarter of 2016, but BTL mortgages where a rent receiver was appointed actually increased by 5.4 per cent, following on from a 1 per cent increase in Q2.

During the third quarter rent receivers were appointed to 606 BTL properties, bringing the stock of accounts with rent receivers appointed to 6,051; this is an increase of 5 per cent from the end of June.

A total of 288 properties were taken into possession by lenders during the quarter, 148 of which were repossessed on foot of a court order, while the remaining 140 were voluntarily surrendered or abandoned. During the quarter almost 300 properties were disposed of.

Vulture funds

So-called “non-bank entities”, such as vulture funds and private equity funds, now hold 45,678 mortgage accounts, or 5 per cent of total residential mortgage market, and 7 per cent of BTL mortgages the figures show.

Funds including Tanager and Mars Capital entered the Irish mortgage market in large numbers through the acquisition of loan books from the likes of Irish Nationwide Building Society and Bank of Scotland.

Of this 45,000 or so mortgages, almost 70 per cent are held by regulated retail credit firms, with the remainder held by unregulated loan owners. A considerable number of theses are in arrears, with 38 per cent of residential mortgages held by unregulated loan owners in arrears of more than 720 days, compared with 19 per cent of accounts held by retail credit firms.

Restructuring activity is higher among retail credit firms, with 24 per cent of loans restructured at the end of September, compared with 21 per cent for unregulated loan owners.