Mortgage arrears: no more temporary fixes

Significant progress has been made in the last couple of years in dealing with mortgage arrears, but more work remains to be done. A Central Bank report published yesterday shows that some 29,000 loans are now in arrears of more than two years and in many cases a lot longer. A significant group of borrowers are in deep trouble.

Pressure is now on the banks from the ECB to deal with non-performing loans, of which mortgages in arrears are the major part. However, with or without this push from Frankfurt, this issue would have to be dealt with anyway. A range of options have been developed, from mortgage-to-rent arrangements to the insolvency legislation for those in deep financial distress. The Central Bank calculates that some 14,000 of the mortgage arrears cases relating to family homes involve a risk of repossession.

There is a need to differentiate between those who have engaged with the banks to try to find a solution and those who have not

There is no one solution to this problem. Clearly regulators, banks and the State need to work together to ensure that options such as the mortgage-to-rent scheme are available where appropriate. This is the kind of longer-term solution which was slow to be brought forward in the early years of the crisis, when there was too great a reliance on temporary fixes. The threat of rising repossessions over the next few years also puts further pressure on the Government in relation to the chronic shortage of social housing and affordable rental properties.

There is also a need to differentiate between those who have engaged with the banks to try to find a solution and those who have not. Many of these cases of non-engagement – making up almost four in 10 of those in long-term arrears – have been allowed to run on for too long. Mortgage arrears peaked in 2013 and progress in dealing with the problem was delayed originally by a legislative issue. Since then there has been progress, but the hardest cases remain. There seems little point in allowing loans which are years in arrears to drop into ever deeper trouble. But even on an optimistic view it will be several more years before this is dealt with.