The Central Bank reported today that the number of mortgage accounts in arrears has fallen again but while BTL (buy-to-let) mortgages have fallen, they are still at an extraordinarily high level despite the benefit of low tracker rates and in Dublin rents just 10% short of the 2007 peak.
The Bank said that at end-September 2014, there were 760,238 private residential mortgage accounts for principal dwellings (PDH) held in the Republic of Ireland, to a value of €105.5bn. Of this total stock, 117,889 accounts were in arrears, a fall of 8,116 or 6.4% over the quarter. Some 84,955 accounts (11.2%) were in arrears of more than 90 days.
A total of 109,911 mortgage accounts had been restructured at the end of September and this reflects an increase of 7.8% since the end of June.
Accounts in arrears over 720 days now constitute 31.8% of all accounts in arrears, and 73% of arrears outstanding. The Bank said: "It is worth noting that the pace of increase in very long-term arrears moderated significantly in Q3 with only a 1.1% quarter-on-quarter increase compared to a 5% increase in Q2. The total number of PDH accounts in arrears declined by 6.4% relative to Q2 (6.3% decline in value terms). Nonetheless, the value of accounts in longer-term arrears over 360 days remains large, amounting to €12.2bn at end-September."
At end-September 2014, there were 143,354 residential mortgage accounts for buy-to-let properties held in the Republic of Ireland, to a value of €28.8bn. Some 38,463 (26.8%) of these accounts were in arrears, compared to 39,669 (27.5%) at the end of June. Of this total stock of accounts, 31,619, or 22.1%, were in arrears of more than 90 days, reflecting a decrease of 0.4% over the quarter. Banks subject to the Central Bank’s MART targets recorded a slightly larger decline of 0.8% in the number of BTL accounts in arrears over 90 days. The outstanding balance on all lenders’ BTL mortgage accounts in arrears of more than 90 days was €8.9bn at end-September, equivalent to 30.8% of the total outstanding balance on all BTL mortgage accounts.
During the third quarter of 2014, legal proceedings were issued to enforce the debt/security on a PDH mortgage in 2,514 cases. Lenders were in possession of 1,393 PDH properties at end-September 2014.
A total of 83 BTL properties were taken into possession by lenders during the quarter and they were in possession of 634 BTL properties at end-September 2014.
Dermot O'Leary, chief economist at Goodbody, commented : "A mixed bag of opinions: The latest residential mortgage arrears statistics just released by the Central Bank provide a mixed bag of opinions on the progress in this area. On the one hand, it is encouraging that arrears continue to fall, particularly in the early stage categories. It is also encouraging that progress is being made on moving troubled mortgage accounts into a restructuring arrangement. On the other hand, outstanding questions remain about the appropriateness of the solutions which are being provided, with the largest cohort of restructured mortgages seeing one of the highest incidences of re-default.
Total “distress” still at record highs: In total, the number of accounts in arrears over 90 days fell by 5% in Q3 to stand at 117,000 (12.9% of total mortgages). This was partly due to another large increase in restructured mortgages, which went from 8.5% to 9.6% of the total stock. Taking both as a gauge of stress, there were 22.5% of mortgages in these categories, up from 21.9% in Q2. In value terms, the total in arrears over 90 days plus those restructured stood at 29.3%, up from 28.7% in Q2. Both of these are at record highs.
Early stage arrears falling fast for owner-occupiers: In the owner occupier space, there is now significant downward momentum in early stage arrears. Arrears cases up to 90 days fell by 8% in Q3, its eight consecutive quarterly decline, reflecting the improvement in the economic environment over this time. Arrears over 90 days also continued to fall (both volume and value). Arrears over 90 days (by value) now represent 15.7% of total mortgages, the lowest since September 2012. Although we don’t have information on the flow, this partly reflects the fact that the banks are moving customers into restructured solutions (9.5% of total in Q3, relative to 8.3% in Q2). Total arrears over 90 days plus restructures stood at 25.2% in Q3, up from 24.8% in Q2.
Value of arrears fell in the BTL sector: The total value of buy-to-let mortgages in arrears fell by 3% qoq, driven by early stage arrears and arrears between 91-180 days, which fell 16% and 10% qoq respectively. Arrears in the over 180 days category continued to rise (+0.4%), albeit at the slowest pace in three quarters. Arrears over 90 days rose marginally to 30.8% (was 30.7%) as the total outstanding balance of BTL mortgages fell on the quarter. The majority of the improvement in the BTL arrears profile is due to restructuring which rose by 6% qoq which means that the total arrears over 90 days plus restructures rose to 44.1% from 43%."