Mortgage arrears: a blot on the positive economic landscape

Devastating issue of 37,269 accounts over two years behind risks going unresolved

The new year is only six days old but already there has been a flood of positive economic indicators.

New car sales were up 30 per cent in 2015 to levels not seen since the economy crashed.

The number of people unemployed fell by 700 in December over the previous month, with the jobless rate coming in at 8.8 per cent versus 10.4 per cent a year earlier.

The exchequer returns yesterday showed that the State collected €45.6 billion in tax in 2015, some €3.3 billion more than it had forecast at the beginning of the year. This was the result of increased employment and strong Vat returns boosted by consumer spending.

And, in case you’ve forgotten, Ireland is the fastest growing economy in Europe right now.

Yet there is one indicator that remains stubbornly high and it is having a devastating impact on people’s lives: long-term mortgage arrears.

On December 11th, the Central Bank of Ireland published data on mortgage arrears for the third quarter, which showed that 37,269 owner-occupied mortgage accounts were in arrears of 720 days or more.

In other words, they are more than two years behind with their payments. In fact, many of them are not making any payments at all.

That’s 40 per cent of all private dwelling mortgage accounts that are in arrears some seven years after the banking and property crash here. It’s a depressing statistic.

These account holders have built up just more than €2 billion of arrears on combined mortgages of €8.2 billion. That’s an arrears average of more than €53,600 per account. It’s a debt hole that most of the home owners probably won’t be able to climb out of without some form of debt forgiveness by their lender.

Small reductions

The new personal insolvency regime and mortgage-to-rent scheme haven’t worked as hoped while the painstaking case-by-case engagement by the banks is only now beginning to deliver small reductions to the longterm arrears numbers (there were 772 fewer cases in the third quarter data).

This massive social issue also risks being lost in the wash as the public debate now shifts towards solving the chronic lack of housing supply in the system.

Just before Christmas the Irish Mortgage Holders Organisation (IMHO) met the Banking and Payments Federation Ireland with a view to bringing all stakeholders around the table to try and thrash out a solution to the longterm arrears problem.

Big-bang solution

David Hall

, chief executive of the IMHO, wants to bring banks, Government, regulators, the courts services, and debt advisory agencies around the table to see if a big-bang solution can be framed for long-term arrears.

Hall is proposing an amnesty of maybe six to nine months during which the banks will pause their legal actions against borrowers and offer another chance for them to engage on a solution.

He accepts that the quid pro quo might be some form of accelerated repossession in cases where borrowers still refuse to engage with their lenders.

Hall has asked Labour Party TD Ciarán Lynch, who led the Oireachtas Banking Inquiry's hearings, to chair such a meeting.

Finding a middle ground between the various groups won’t be easy. Hall will face numerous legal hurdles and various objections to his plan but it has to be worth trying. Otherwise, his prediction that about 20,000 of the long-term arrears cases will end up having their homes repossessed will become a reality and will mock our economic recovery. Twitter: @CiaranHancock1