Ratings agency issues 'negative' outlook on mortgage payments

THE NUMBER of Irish homeowners falling behind on their mortgage payments is likely to continue growing this year, according to international ratings agency Fitch.

The agency, which measures businesses’ and organisations’ ability to repay their debts, describes the outlook for Irish residential mortgage-backed securities as “negative” for the rest of the year in a report published yesterday.

The assessment means Fitch believes there is a high risk that numbers who default on mortgage repayments are set to increase.

In contrast, the agency believes that the situation in many eurozone countries and in Britain has begun to stabilise, largely because low interest rates have cut the cost of repaying mortgages.

Its report also notes that Irish landlords appear to be under particular pressure, as arrears levels in buy-to-let mortgages are “significantly higher” than for home loans.

Rules introduced by the Financial Regulator requiring banks to wait at least one year before taking legal action against anyone who falls behind on their mortgage payments have prompted Fitch to review all residential mortgage-backed securities issued in the Republic.

This could prompt the agency to conclude that there is an increased risk of default.

Meanwhile, the Irish Brokers’ Association said yesterday that about 10,000 accountants, lawyers and property developers – who have interest-only mortgages over homes bought for €1 million-plus – face serious financial trouble if interest rates rise, which is expected to happen over the next 12 months.

The association said that the situation was another “disaster waiting to unfold”.