Mortgage arrears decline for first time since bubble burst

CONOR POPE, Consumer Affairs Correspondent

The numbers in mortgage arrears have fallen for the first time in five years , according to figures released by the Central Bank yesterday and although the decrease is marginal it marks the first time an upward trend has been reversed since the property market collapsed.

At the end of September there were 768,136 private residential mortgage accounts on principal homes worth €108.5 billion. The number of residential mortgage accounts in arrears dropped from 142,892 - or 18.5 per cent of the total stock - to 141,520 during the quarter to the end of September, a fall of just 0.1 per cent while the outstanding balance on arrears fell by 0.5 per cent.

The number of accounts in arrears of more than 90 days stood at 99,189, up 1,315 on the previous quarter however the Central Bank said this increase was driven entirely by accounts in arrears over 720 days with all other categories declining.

The number of mortgages in arrears of less than 90 days fell by 6 per cent during the third quarter, compared to a decrease of 3.3 per cent on the previous three months.

All told 80,555 mortgage accounts on principal residences were classified as restructured at the end of September, reflecting a quarter-on-quarter increase of 1.5 per cent. Of these restructured accounts, 78.9 per cent were meeting the terms of their restructured loan arrangements with some 1,154 split mortgages arranged.

While the Free Legal Advice Centre (Flac) welcomed the small reduction in the numbers of family home mortgage accounts in short term arrears, it said the figures masked “something that is a real concern, which is the increase of 10 per cent in principal private dwelling mortgages in long term arrears - over 2 years”.

FLAC’s Senior Policy Analyst Paul Joyce said this was “particularly concerning because that’s nearly 32,000 accounts where the average arrears exist for over 2 years and where the average level of arrears has risen from 40,000 in the last quarter to over 41,000”.

He also pointed out that the figures only refer to the mortgage debt. “The chances are that these people have other unsecured debt which they are trying to manage as well - but we have no data on that. These long term arrears will be particularly difficult to restructure”.

The Irish Mortgage Holders Organisation (IMHO) said the figures suggested that the Central Bank, banks and Government were complicit in failing to deal with the mortgage crisis. “Figures are presented to distract from the main category of borrowers who are in major difficulty those in arrears over one year,” the IMHO said.

It said there was an intentional focus placed on the category of those in arrears of up to 90 days which “distracts from the enormous issue of those in arrears above one year. There are 59,844 accounts in arrears above one year, 28,010 of those are in arrears between one and two years with an astonishing 31,834 in arrears longer than two years.”

It said that “urgent action is required to address these people who are in serious danger of being attacked by the legal frameworks available to banks according.

According to the Central Bank the number of buy-to-let properties in mortgage arrears rose from 39,948 - or 26.9 per cent of the total market - to 40,426 - 27.4 per cent - in the third quarter of 2013 but as with principal residences, the increase was driven by longer-term arrears, with the number of accounts in arrears up to 180 days declining.

Legal proceedings were issued in 1,830 cases while court proceedings concluded in 361 cases resulting in 89 of court-ordered repossession or sales.

There were 1,002 properties in the banks’ possession at the beginning of the quarter. A total of 209 properties were taken into possession by lenders during the quarter, of which 76 were repossessed on foot of a Court Order, while the remaining 133 were voluntarily surrendered or abandoned.