Latest mortgage arrears data offers some hope - but only a glimmer
The fact remains that one in five owner-occupier mortgages are in difficulty, and buy-to-let loan figures will be worse
YOU WOULD be forgiven for thinking the State authorities only start breaking out new statistics when they begin to show a positive trend for the Irish banks, most of which are State-owned.
The Department of Finance started producing monthly statistics showing bank deposit levels when they started levelling out. Yesterday, as part of the second-quarter mortgage arrears figures, the Central Bank included for the first time details of mortgages in arrears of 90 days or fewer. These show the first signs of people struggling to repay their mortgages.
The new figures offer some hope – but it is still only a glimmer.
The number of mortgages in arrears of 90 days or fewer fell to 45,165 mortgages, or 5.9 per cent of the 761,533 home loans in June, down from 46,284 mortgages, or 6 per cent, three months earlier. This is the second quarter in a row that the figures have been falling.
Producing early-arrears figures will allow the Central Bank to show that it is getting a handle on the exact number of Irish mortgages in difficulty.
The next step is how to deal with those mortgages, and that is obviously a more tricky and far more long-term assignment. The Central Bank is pushing lenders to roll out new mortgage products, such as split mortgages, mortgage-to-rent deals and negative equity mortgages, before the year’s end.
The fact that the increase in arrears of 90 days or more – the benchmark gauge of distressed mortgages – is slowing is also positive. Mortgages where repayments of three months or more were missed were at 10.9 per cent in June, up from 10.2 per cent in March.
Including the new figures gives a fuller picture of the level of stress in the €112 billion owner- occupier mortgage books of the banks. Based on total arrears (of more and fewer than 90 days) and restructured mortgages, where loans are modified to help borrowers make at least some repayment to the banks, just over one in five mortgages (22.1 per cent) are in some kind of financial difficulty.
But in terms of the value of the debt, the figure is much worse. Mortgages of €30.5 billion, or 27 per cent of all Irish home-loan debt, are in arrears or have been restructured. This is an eye-watering figure, but the percentage of arrears on buy-to-let mortgages will be worse based on the figures already provided by the banks.
The Central Bank said yesterday it would produce industry-wide figures for arrears on buy-to-let loans later this year. They are due to be published in November with the owner-occupier arrears figures for the third quarter of 2012.
There is more than €23 billion worth of buy-to-let mortgages at Bank of Ireland, AIB, Permanent TSB and on the former Irish Nationwide book at Irish Bank Resolution Corporation, the new name for Anglo.
So the €64 billion question is whether the banks will require further capital beyond this sum as a result of still-increasing arrears.
Analysts have already moved their estimates for total mortgage losses a few billion euro beyond the €9 billion worst-case scenario set in last year’s bank stress tests.
But lower than expected losses on asset disposals by the banks as part of their deleveraging plans have created “some room” on capital to offset higher than expected mortgage losses, according to Danske Markets analyst Owen Callan.
The final losses will depend on how the banks deal with unsustainable mortgage debt using the advanced forbearance measures and, failing those, how the new personal insolvency regime, which offers debt writedowns, will work.