Mortgage arrears on the rise

Central Bank figures published today show 55,763 home loans, or 7.2 per cent of all mortgages, were in arrears for more than 90 days at the end of June.

This compares to an arrears level of 6.3 per cent three months ago, and 5.7 per cent at the end of last year.

At the end of June there were 777,321 private residential mortgage accounts held in the Republic of Ireland to a value of €115 billion.

According to the Central Bank, 69,837 residential mortgages were categorised as restructured at the end of June. This compares with 62,936 restructured accounts at the end of March. Of this total 39,395 are not in arrears.

Between April and June mortgage lenders applied to commence proceedings to enforce the debt/security on a mortgage in 209 cases comprising arrears totalling €7.2 million built up on loans equating to €60.2 million.

Chief executive of the Irish Brokers Association Ciaran Phelan said banks are starting to understand that restructuring was the "only real solution".

“According to these numbers, over 4,000 mortgages in arrears were restructured during the quarter; this number needs to rise significantly if we’re to slow the growing level of arrears – there were 6,000 new households in arrears in the quarter,” he said.

The Government is considering establishing a new agency with legal powers to enforce debt restructuring agreements between banks and struggling home owners. The Cabinet is awaiting a report from an expert group due by the end of next month.

One measure now under consideration is converting the Money Advice and Budgeting Service (Mabs) into a personal debt management agency, which would be given “quasi-judicial status” to enable it to “support families who make an honest effort to deal with their debts, including non-mortgage debt”.

These new legal powers would enable such an agency to require banks to achieve a resolution in these cases. Mabs spokesman Michael Culloty said today that about half of its clients came seeking mortgage advice.

Mr Culloty said that distressed mortgages remained a “growing problem”.

He said the agency had an ongoing relationship with banks to help clients in difficulty but this role was only on a voluntary footing at present.

The extent of the collapse in housing prices – which is trapping many people in negative equity and making it difficult for those in arrears to sell their property to pay off their loans – was reinforced by new figures from the Central Statistics Office this morning which showed that residential property prices declined by 12.5 per cent in the year to July 2011.

According to Davy chief economist Conall Mac Coille the latest fall means the “peak-to-trough decline in property prices is now 42.5 per cent," adding that prices have fallen 9.2 per cent in the first seven months of this year.

Separately, the Credit Review Office said it would be a “challenge” for the State’s biggest banks to meet a Government target to lend €3 billion each to small- and medium-sized businesses this year.

The Credit Review Office, which was established to monitor AIB and Bank of Ireland’s lending to small- and medium-sized businesses, said in its quarterly report for the March to June period that demand for credit from such businesses was low.