Residential mortgage arrears fall in last three months of year

There was a slight decrease in residential mortgage arrears in the last three months of 2020, driven by a decline in longer-term arrears.

According to figures from the Central Bank published on Thursday, 54,986 homeowners were in arrears on their mortgage as of the end of last December.

This represents a decline of some 462, or 0.8 per cent, on the previous quarter, and means that 7.6 per cent of all mortgages were in arrears at the end of 2020. This is down from 8.2 per cent at the end of 2019.

The Covid-19 pandemic did not negatively affect arrears figures in 2020, thanks to payment breaks agreed between borrowers and lenders.

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Of those in arrears, some 70 per cent, or 38,785, were in arrears of more than 90 days, owing €7.4 billion, while accounts in arrears of more than two years accounted for 45.4 per cent of all accounts in arrears at the end of December. Some 30 per cent of cases were in arrears for more than five years, with 10 per cent, or 5,266 mortgages, in arrears of more than 10 years.

Rachel McGovern, director of financial services with Brokers Ireland, said this level of arrears is “still far too high”. As a result, Ireland’s homeowners continue to pay disproportionately higher mortgage interest rates than those of the euro area.

“The fact of the matter is that mortgage holders in Ireland are paying dearly for a failure to successfully deal with mortgage arrears that have been allowed to drag on interminably,” she said.

Restructuring

Non-bank entities have 13 per cent of all outstanding mortgages. However, they hold 57 per cent of all residential mortgages in arrears over two years.

Ten per cent of all mortgages, at 72,866, were classified as restructured as of the end of December 2020, down by 4.5 per cent on the previous quarter. This was primarily due to a reduction in the number of permanent restructuring arrangements, such as arrears capitalisation and term extensions, from the mortgage statistics.

During the quarter 4,203 new restructuring arrangements were agreed. This is up slightly on the previous quarter (3,954).

During the fourth quarter, some 253 residential mortgage holders entered legal proceedings. This means that 7,301 mortgages currently have legal proceedings in process, down by 637 from September 2020.

Of these, the vast majority (5,095 accounts) have been in the legal system for more than two years, with some 2,181 of those accounts in the courts system for more than five years.

Courts granted an order for repossession or sale of the property on 96 properties during the period, while 29 were taken into possession by lenders during the quarter, down from 35 properties in the previous quarter.

Twenty-five of these were voluntarily surrendered or abandoned. With 76 properties sold, it means that lenders were in possession of 744 residential properties at the end of December.

Buy to let

The number of buy-to-let (BTL) properties which were in arrears as of the end of December fell by 4 per cent on the previous quarter, down by 659 to 15,138. Of these, 12,615 accounts, or 13.1 per cent, were in arrears of more than 90 days, down by 0.5 per cent over the quarter.

Some €3.2 billion was owned on those properties in arrears of more than 90 days, equivalent to 21 per cent of the balance outstanding on all BTL accounts. Of the buy-to-let mortgages in arrears, 13 per cent were so for more than 10 years.

Non-bank entities accounted for 27 per cent of the total stock of BTL mortgage accounts outstanding; of these, 36 per cent were in arrears of more than 90 days, and 29 per cent of accounts in arrears of more than two years.

The number of restructured mortgages fell during the period, down by 471 to 10,731. Of these, 18 per cent were in arrears.

Rent receivers were appointed to a further 177 buy-to-let properties during the fourth quarter, bringing the total of such properties up to 4,469.

Lenders repossessed 40 buy-to-let properties during the period, 37 of which were voluntarily surrendered or abandoned. Sixty-seven such properties were sold, which left lenders in possession of 363 buy-to-let properties as of the end of December.