Mortgage arrears increase again

More than one in ten homeowners are in financial difficulty with their mortgages, according to new figures published by the Central Bank today, which also show a rise in arrears on buy-to-let mortgages.

The percentage of mortgages in arrears of 90 days or more increased to 11.3 per cent or 86,146 of the 761,954 private residential mortgages in the country, during the three months ended September, compared with 10.6 per cent or 81,035 mortgages at the end of June. Some 67,401 accounts were in arrears of more than 180 days at the end of September.

The number of early arrears cases also increased during the third quarter of 2012, reversing the trend of the previous two quarters.

The figures show that 49,482 private residential mortgage accounts were in arrears of less than 90 days at the end of September, reflecting a quarter-on-quarter increase of 4.9 per cent.

Figures on buy-to-let (BTL) properties, published for the first time today by the Central Bank, indicate that 26,770 (17.9 per cent) of BTL accounts were in arrears of more than 90 days as at the end of September.

By value, the amount of mortgage debt in arrears of 90 days or more totalled €16.8 billion or 15.1 per cent of the €111.2 billion owing on Irish residential mortgages, while the outstanding balance on buy-to-let mortgage accounts in arrears of more than 90 days was €7.9 billion at end-September, equivalent to 25.5 per cent of the total outstanding balance on all BTL mortgages.

A total of 81,683 private residential mortgage accounts were categorised as restructured at end-September 2012, according to the figures. Nearly half of these were in arrears of varying lengths.

The restructuring of mortgages involves the switching to an interest-only mortgage, a reduction in the payment amount, a temporary deferral of payment, an extension to the term of the mortgage or capitalising arrears amounts and related interest.

Speaking in Brussels ahead of a European leaders’ meeting, Taoiseach Enda Kenny said there had been scaremongering about the impact of the Government’s decision to lose a legal loophole that prevented banks repossessing the homes of defaulting borrowers who had taken out their mortgages before 2009.

“There was some Opposition scaremongering that this could lead to a rash of house repossessions. This is not the case at all. Obviously there are statutory rights in respect of banks lending for very many decades that apply here. No one wants to see houses repossessed.”

He said the level of repossessions in Ireland had actually been very small.

Government, in agreement with the Troika, has agreed to close the loophole which prevents banks foreclosing on certain properties.

The flaw became apparent in a 2011 judgment by Judge Elizabeth Dunne.

The Taoiseach said the Government’s personal insolvency bill, once operational, will also offer another opportunity to deal with mortgage distress.

Minister for Justice Alan Shatter yesterday said the Government was aware of "the real and significant difficulties some mortgage holders are facing" and was committed to advancing appropriate measures to assist those mortgage holders who are experiencing real and genuine difficulty.

According to the Central Bank the number of properties in possession decreased to 944 by the beginning of the third quarter. The Central Bank said legal proceedings were issued to enforce on debt or security on a mortgage in 466 cases during the third quarter of the year, up from 345 cases the previous quarter.

Court proceedings concluded in 119 cases during the period and in 79 of these cases the courts granted orders for possession or sale of the property.

The Irish Banking Federation noted the Irish level of repossession remains very low by international standards; currently standing at 20 per 100,000 mortgages compared to 72 per 100,000 in the UK.

It said while the overall level of private residential mortgage arrears has increased - the pace of that increase is slowing.

"Given the ongoing economic and financial backdrop, it is not surprising that the overall stock of mortgage arrears continues to grow and is likely to continue that way for some months yet," IBF director of public affairs Felix O'Regan said.

Noeline Blackwell, director general of the Free Legal Advice Centres (Flac), said arrears levels have increased over the 13 reports.

“The arrears crisis continues to be serious but is not unexpected. “No durable, long-term solutions have been put in place. Lenders continue to adopt a sticking-plaster approach to the problem,” she said.

Flac also pointed to the 19,541 households in arrears for two years or more and on average owe arrears of more than €40,000.

The report was published as Minister for Justice Alan Shatter rejected suggestions that repossession levels would surge as the Government is committed to reforming laws in the area amid demands from the bailout Troika.

A loophole which bars banks from repossessing homes in some circumstances is to be closed. David Hall and economist Dr Constantin Gurdgiev, of the Irish Mortgage Holders Association, said the crisis was out of control. “A generation of Irish people are now locked into an endless battle of attrition with the banks,” they said.

“It must be internationally unprecedented for a Taoiseach, Tanaiste, the Governor of the Central Bank and head of banking regulation all to state their dissatisfaction with how banks are dealing with mortgage holders, while at the same time not acting to deliver real policy solutions and changes.

“This government is now fully paralysed by the crisis. Leadership is now required to ensure we do not lose a generation to over-indebtedness.”

Irish Brokers Association chief executive Ciaran Phelan criticised the banks for consistently failing to get to grips with the arrears issue.

"It is a social and economic crisis that has been allowed to continue to spiral out of control with 180,000 out of over 900,000 mortgages no longer being paid on their original terms," he said.