Irish mortgage arrears creep up in first quarter

New spike is expected later this year once lenders’ payment breaks expire

The Central Bank of Ireland wants to avoid a cliff-edge in arrears once payment breaks expire. Photograph: Alan Betson

The Central Bank of Ireland wants to avoid a cliff-edge in arrears once payment breaks expire. Photograph: Alan Betson

 

The number of home loans falling into arrears crept up in the first quarter of the year as Covid-19 hit the economy, though many of these have reverted to not being behind in repayments as banks introduced widespread payment breaks in March to borrowers hit by the crisis.

Figures published by the Central Bank on Tuesday show that the number of owner-occupier mortgage accounts in arrears for less than 90 days increased by 3,827 cases during the quarter.

“However, preliminary indications are that a significant number of new arrears accounts have since reverted to having no arrears, in part owing to the introduction of Covid-19 payment breaks in the last two to three weeks of the quarter,” the Central Bank said in a statement.

The rate of mortgages in arrears for more than 90 days dipped to 5.6 per cent at the end of the quarter from 5.7 per cent in December, continuing a trend of consecutive quarterly declines from a peak of 12.9 per cent in 2013.

Almost 80,000 mortgage holders had availed of temporary payment breaks as of the end of May, helping to keep the level of arrears in check as the economic crash caused by the coronavirus pandemic has led to a surge in layoffs.

More than one million people have benefitted as the Government provided special unemployment payments to individuals who lost their jobs during the crisis, and subsidised incomes of workers whose firms had been affected.

Banks, under pressure from regulators, are currently assessing which of the loans subject to payment breaks will not be able to return to regular payments after six months. They are working on restructuring and forbearance solutions for these borrowers in an effort to avoid a full-blown fresh arrears crisis.

Expected spike

Nevertheless, banks and analysts foresee a fresh spike in arrears later this year as payment breaks come to an end.

At the end of March, there were 739,592 private residential mortgage accounts for principal dwellings held in the Republic, with a value of €98 billion.

Non-bank lenders and funds that acquired loans from banks exiting the market or shrinking their balance sheets in the wake of the financial crash now hold about 13 per cent of all owner-occupier mortgages. These entities own more than half of all loans more than two years in arrears in the State.

At end-March 2020, there were 101,585 buy-to-let (BTL) mortgages in in the market, to a value of €16.6 billion.

Some 16,773 BTL accounts were in arrears at end-March, an increase of 211 accounts or 1.3 per cent over the quarter. Of the total BTL stock, 13.3 per cent were in arrears of more than 90 days, reflecting an decrease of 3.1 per cent over the quarter.