More than one in 10 mortgages in arrears - Moodys

MORE THAN one in 10 mortgage borrowers had fallen behind with their repayments by the end of October, marking a new peak in home loan arrears, figures released yesterday show.

Credit ratings agency Moody’s said that arrears of 90 days or more in a pool of mortgages representing close to half the Republic’s home loans rose to 10.14 per cent in the three months to end of October.

Moody’s said the level of arrears had risen steeply since its previous report, published in July, which showed that 8.85 per cent of borrowers were 90 days or more behind with their mortgage repayments.

October was the first time that the arrears rate in the home loans that Moody’s keeps under review increased past 10 per cent.

More than 773,000 homeowners have mortgages and owe a total of about €114 billion to their banks.Close to 78,500 of them are having difficulty meeting their repayments, according to the figures from Moody’s.

These indicate that the number of homeowners who defaulted on their mortgages also rose sharply.

The agency said the delinquency rate of 360 days or more, which it uses as an indicator for defaults, jumped to 3.4 per cent in October from 2.9 per cent in July.

Moody’s blamed high unemployment for pushing more borrowers into arrears. It estimated that more than 14 per cent of the Republic’s workers will be out of a job next year.

It also warned that falling house prices would increase the size of losses the banks would have to absorb on defaulted mortgages.

“House prices already fell by 45 per cent between September 2007 and October 2011, and Moody’s expects them to fall further during 2012.”

The agency’s findings are likely to fuel debate about the need for the State to provide a long-term solution for heavily indebted homeowners.

In September a group appointed by the Government to look at possible solutions recommended a number of measures.

These included allowing borrowers to trade down while retaining their negative equity, sale by agreement and a structure whereby they would surrender their property and rent it back through their local authority. That particular proposal would cost the State €35 million a year.

The Republic’s own official figures show that the number of householders falling behind with their mortgage repayments is increasing.

Last month the Central Bank said that 8.1 per cent of mortgages were 90 days or more in arrears by the end of September, compared with 7.2 per cent at the end of June.

The bank’s figures meant that more than 69,000 homeowners were behind with their repayments. It also said at the time that around 100,000 mortgages in the State were either in arrears or had had their terms renegotiated.

Moody’s figures are used to rate Irish residential mortgage-backed securities, which are bonds issued by the Republic’s banks to international institutions to fund their mortgage lending activities.

The pool of mortgage-backed bonds assessed by Moody’s represented €52.9 billion of total mortgage debt in the Republic. The value of the loans had fallen from €57.9 billion in July.