This morning, the Financial Regulator Matthew Elderfield has finally released data on mortgage arrears, repossessions and restructured mortgages for the second quarter of 2011; the press release is here, the statistics are here. The data paints a disturbing picture of the deteriorating state of mortgage arrears. Total mortgages in arrears for more than 90 days are 55,763, up 12.4% or 6,154 from Q1, 2011 and up 53% or 19,325 from Q2, 2010, a year ago.
The total arrears are divided between those 90-180 days in arrears and those over 180 days in arrears. The latter category is widely considered to be so underwater that default of some sort is likely. The number of mortgages in arrears over 180 days rose to 40,040 in Q2, 2011, up 4,699 or 13.3% from Q1, 2011 and up 61.5% or 15,243 from Q2, 2010, a year ago.
Repossessions are also climbing are were 173 for the quarter, up from 140 in Q2, and up from the general average of less than 100 since records began.
Analysis and comment here later today.
[The above table is taken from this Google docs spreadsheet which also shows a comparison of the condition and treatment of Irish and UK mortgages]
UPDATE: 29th August, 2011. Repossessions are up 73% year on year, this despite there being what is considered a moratorium on repossessions through the introduction of a new code on mortgage arrears.
Arrears are increasing, and increasing at a faster rate –illustrated here.
Oddly enough, the rate of increase is below that recorded at the start of 2010, which could indicate strategic default, that is, people deliberately going into arrears to take advantage of any imminent debt forgiveness program. Although that is a possibility, I think the rate of increase is more to do with cuts to income, be that employers cutting gross salaries, or cutting back overtime, or putting employees on short time. The overall unemployment rate remains elevated but has remained more or less flat in the past twelve months, though there is some evidence (eg through the quarterly national household survey) that emigration might be taking some of the strain. Borrowers might have been using savings/redundancy payments to service the mortgage and these are now exhausted. As a society that traditionally frowns on indebtedness and bad debts, it’s perhaps the case that opinions are changing as the reporting of the scale of indebtedness and difficulties with repaying debt, becomes so commonplace.
Despite the gloom and doom surrounding these figures today, it is still the case that the vast majority of mortgage payers are repaying their mortgages as agreed each month. As pointed out by Seamus Coffey on irisheconomy.ie, some €5bn of principal is expected to be repaid on €116bn of mortgages this year and perhaps a similar amount of interest. So the repayment of mortgage debt in Ireland has not stopped by any means, but there are very obvious difficulties.
Trends should depend on
(a) unemployment – currently at 14.3%, the recent trend is as follows
Most forecasters see a slight easing in the rate this year. For example Ulster Bank this morning indicated that the rate will average 14.1% for 2011 which would indicate an end of year rate of below 14%. However, the Government is set to reduce employment in the public sector as part of its €3.6bn – possibly more – budget adjustment in 2012. It may also cut capital programmes which results in further unemployment, particularly in the construction sector.
(b) house prices – currently 42.5% below peak, the trend is downwards. Most commentators had been predicting a bottoming of prices in 2012, but it is unclear when predictions are suggesting prices would rise again.
(c) disposable income – set to be reduced with new taxes (for example,the €100 property tax) and in all likelihood the reduction in income tax bands and the elimination of some tax reliefs. The outlook for inflation is not at all good which is surprising given the collapse in incomes and the fact that in Ireland, an apparently representative basket of goods and services is still 18% more expensive than the European average. Energy is set to rise by 15% in September 2011, and standard variable interest rates continue to trend upwards. Even food basics are increasing by 1.1% per annum, and inflation overall is presently running at nearly 3% per annum.
So will the rate of arrears rise? Difficult to say, but none of the underlying influences would appear to have a positive outlook in the short term.