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News : Property Last Updated: Nov 28, 2013 - 2:50 PM

Irish mortgage arrears less than 90 days fall and over rise
By Finfacts Team
Nov 28, 2013 - 2:47 PM

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The number of Irish mortgages in arrears for more than 90 days rose in the third quarter of the year compared to the previous three months, according to the Central Bank today. Early arrears declined significantly during the third quarter of the year.

The proportion of residential mortgages in arrears for more than 90 days rose to 12.9% by the end of September, up from 12.7% in the previous three months. The figures show that buy-to-let arrears grew to 27.3% from 26.9% at the end of June.

The number of mortgage accounts for principal dwelling houses (PDH) in arrears, fell from 142,892 (18.5% of the total stock) to 141,520 (18.4%) during the quarter to end-September 2013. The outstanding balance on all PDH mortgages in arrears fell by 0.5% during Q3, the first decrease since the series began in September 2009.

PDH mortgage accounts in arrears of over 90 days at end-September 2013 amounted to 99,189, an increase of 1,315 on the previous quarter. This increase was driven entirely by accounts in arrears over 720 days with all other maturity categories declining. These now constitute 22.5% of all accounts in arrears, and just over 60% of arrears outstanding.

The number of PDH accounts in early arrears of less than 90 days declined by 6% during the third quarter, compared to a decrease of 3.3% in Q2.

There was a total stock of 80,555 PDH mortgage accounts classified as restructured at end-September, reflecting a quarter-on-quarter increase of 1.5%. Of these restructured accounts, 78.9% were deemed to be meeting the terms of their current restructure arrangement.

The number of buy-to-let (BTL) mortgage accounts in arrears rose from 39,948 (26.9%) to 40,426 (27.4%) in the third quarter of 2013. However, similar to PDH developments, the increase was driven by longer-term arrears, with the number of accounts in arrears up to 180 days declining.
There were 31,227 (21.2%) residential mortgage accounts for BTL properties in arrears of over 90 days at end-September 2013, up from 30,326 (20.4%) at end-June 2013.

The value of total loans was PDH at €108.5bn and BTL at a value of €30.3 billion. The arrears were at €25.6bn and 11.0bn: €36.6bn.

Conall Mac Coille, chief economist at Davy, commented - - "Today’s data show that the owner-occupier 90+ day mortgage arrears rate was 12.9% in Q3 2013, up from 12.7% in Q2 2013. This is the smallest rise since the series began in 2009. The buy-to-let 90+ day arrears rate is now 21.2%, up from 20.4% in Q2.

The rise in the 90+ day rate entirely reflected the 720+ day arrears rate, 90-720 day arrears falling. This provides encouraging evidence that arrears cases are now being dealt with by banks.

In contrast, arrears in the buy-to-let sector continue to rise. The 90+ day arrears rate was 21.2% in Q3 2013, up from 20.4% in Q2 2013. Of the total 31,227 in arrears over 90 days, an enormous 11,597 have been in arrears for over 720 days.

The Central Bank indicated that 78.9% of 80,555 restructured owner-occupier accounts are meeting their repayment terms and 77.9% of 21,607 restructures in the buy-to-let sector. There were 1,154 split mortgages at end-Q3 2013, up from 309 at end-Q2 2013. Total restructures in the owner-occupier sector rose to 80,555 from 79,357 at end-Q2.

Overall, today’s data show a modest improvement in arrears formation. We already know from the Department of Finance’s monthly data series that 90+ day arrears rates fell between August and September among the six main banks. Today’s data provide further evidence that formation rates are improving."

Dermot O'Leary, chief economist at Goodbody commented  -- "While the problem of distressed mortgages remains the biggest issue for Ireland, the fall in early-stage arrears confirms that the scale of the problem is now at least known, rather than worsening. The arrival of new insolvency legislation and targets for the banks means that we will see significant amounts of change in the coming quarters.

Longer-term arrears up, but early stage down: There is mixed news contained in today’s mortgage arrears statistics from the Central Bank. On the one hand, the scale of the problem of distressed mortgage holders remains enormous, with the number of accounts in arrears over 90 days rising to 14.2% of total mortgage outstanding (up from 13.9% in Q2). However, a 6% fall in the number of arrears cases below 90 days (early-stage arrears) resulted in the total number of arrears cases falling for the first time since the data began.

90 day arrears plus restructured at 27.3% of total value of mortgages: 20.0% of the total mortgage book is in arrears of over 90 days (by value), with a further 7.3% in a restructuring arrangement, but not in arrears. This total (27.3%) compares to 26.7% in Q2.

Buy-to-let remains the key area of concern: Unsurprisingly, the buy-to-let sector remains the most troubled. In Q3, the value in arrears over 90 days rose to 29.3% of total (28.5% of total in Q2 2013), while a further 11.2% were classified as restructured but not in arrears (10.7% in Q2). In the owner-occupier space, arrears over 90 days amounted to 17.4% of the total (17.0% in Q2), with a further 6.2% in a restructuring arrangement (6.1% in Q2), but not in arrears. It is noteworthy that Q3 saw the first decrease in the total amount of mortgages in arrears since the data became available in Q3 2009.

Gradual move to longer-term restructures continuing: Restructured mortgages now account for 6.1% of the total volume of mortgages (7.3% by value), with the Central Bank noting that c.80% of these mortgages were meeting their terms. Of these restructures, interest only is still the most popular method (25% of total), but is becoming less prevalent as banks move towards a broader suite of options.

Arrears remain within assumption: The latest data reside well within our expected loss rate levels at the banks. Along with the better than expected employment data earlier this week, this should provide some comfort going into next year’s stress tests. On the more immediate horizon are the results of the Asset Quality Review (AQR) by the Central Bank, although we do not expect any major implications for the banks from this review.

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