Mortgage arrears hinders recovery

Thu, Feb 28, 2013, 00:00

The property market will continue to falter until the arrears crisis which has seen nearly 170,000 mortgage holders struggle to pay their loans since the bubble burst is tackled in a meaningful way by banks and the regulator, the Irish Mortgage Holders’ Association has warned.

Head of the advocacy group David Hall was speaking after the Central Bank announced meetings next week between its officials and the State’s leading banks and credit unions to discuss how an agreement on “burden sharing” relating to problem loans can be reached.

The meetings, which are set to take place next Tuesday and Thursday at the request of Fiona Muldoon, the Central Bank’s director of credit institutions and insurance supervision, will “discuss the creation of a workable burden-sharing agreement between secured and unsecured lenders”.

Real action

However, more action is urgently needed if the badly damaged residential property sector is to be repaired, Mr Hall said. “Meetings are all well and good but they do not constitute real action which is long overdue,” he told The Irish Times. “The spin and fiction which is being put about by the banks that claim to be tackling the mortgage arrears crisis does not constitute action either,” Mr Hall continued.

Last week AIB said it would ease the terms on 2,000 mortgages a month. Chief executive David Duffy said the arrears would be tackled by splitting mortgages, which will see part of the loan repayments put on hold until borrowers’ circumstances improve.

Minister for Finance Michael Noonan is also putting pressure on the banks to establish a “systematic planning regime” for dealing with a “set number of cases” of distressed mortgages each month.

But Mr Hall said that until real action was taken people would suffer and the market would not recover. “I believe in statistics not spin and the statistics point to a banking sector which is not doing anything despite their words. The fact is there are 169,000 mortgages in trouble and according to the Central Bank’s most recent figures the banks had just 80 deferred interest mortgages on their books and 10 split mortgages.”

He added that with each passing quarter the crisis had worsened and the knock-on effect was a property market that would not recover.

“People are looking at the bigger picture and looking at the numbers in arrears and many of them are holding off on buying which is depressing the market further and making the negative equity situation worse again,” Mr Hall said.