Research by Central Bank of Ireland economists shows that most Irish
buy-to-let (BTL) mortgages in arrears have been funded by tracker mortgages that
have become more affordable through the financial crisis as they have been
linked to plunging European Central Bank (ECB) interest rates.
The low rate of repossessions, rising rents in Dublin coupled with falling
interest costs, and a period of two years for the Oireachtas to fix a loophole
in a 2009 law, has given rise to speculation of political protection for some
According to the Central Bank research 70% of BTL mortgages that have been in
arrears for 90 days or over, are funded by tracker mortgages.
At end-December 2013, there were 145,530 residential mortgage accounts for
buy-to-let properties held in the Republic of Ireland, to a value of €29.7bn. Some 39,250 (27%) of these accounts were in arrears, compared
to 40,396 (27.4%) at the end of the third quarter. Of this total stock
of accounts, 30,706, or 21.1%, were in arrears of more than 90 days,
reflecting a decrease of 1.5% over the quarter. The outstanding balance
on BTL mortgage accounts in arrears of more than 90 days was €8.7bn at
end-December, equivalent to 29.2% of the total outstanding balance on
all BTL mortgage accounts.
ECB interest rates fell from
4.25% in July 2008 to 0.25% in November 2013.
According to the paper, "Analysing Mortgage
Arrears with Aggregated and Granular Data" variable-rate mortgagees who have
seen rises in rates to offset the falling tracker rates, account for most of the
arrears related to principal dwellings.
While tracker mortgages, as a whole, outnumber
variable-rate products, the latter accounted for 51% of the long-term arrears
total, and 64% of account holders in long-term arrears.
At a conference held Tuesday in Dublin by the
Central Bank, the results of another paper, "Deleveraging in a Highly Indebted Property
Market," were presented. The study found that well-off retirees in Ireland had been better at cutting
their debt burden during the crisis.
As a consequence, the study said certain less
well-off sections of the mortgaged population were likely to remain
significantly indebted as they remain unable to address “their leveraged
We will post links when available to the papers.