This morning the Central Bank of Ireland released its mortgage arrears and repossession statistics for the quarter ending 31st December 2011. The figures show a progressively worse deterioration in arrears. The Q4,2011 figures are shown below along with the historical series since Q3,2009 when the series was first created.
Of the 768,917 mortgage accounts in the State, 70,911 (9.22%) are in arrears of more than 90 days and of these, 53,086 mortgage accounts are in arrears for more than 180 days, equal to six months. With six months plus of arrears, accounts have a high probability of defaulting.
In addition to the above figures, which are appalling, 36,987 mortgage accounts have been restructured and are performing. In half these cases, the restructure is so as to repay interest only. Other restructured formats include repayment holidays, or reduced capital repayments.
In other words, 107,708 mortgage accounts are now either in 90-day-plus arrears or are not being repaid according to the original loan agreement. That’s one in seven mortgage accounts.
The above statistics, in addition to being personal nightmares for the families and borrowers involved, are a nightmare for the economy depressing demand, threatening bank balance sheets and possibly indicating a wave of repossessions which will undermine property prices further. Banks are suggesting the Government’s dithering on personal insolvency arrangements – the latest is the heads of a bill have been published, and the final bill is to be published in April 2012 and it will be enacted some time after that, but it may be some months. There are a code for dealing with mortgage arrears which presently just appears to be kicking the problem down the road.
Here is a comparison between Ireland and the UK, showing that Ireland suffers far more from arrears but far less with repossessions. With our negative equity and unemployment, the writing appears to be on the wall for a major adjustment in how arrears are dealt with. Banks are already complaining that borrowers are strategically not paying mortgages in order to take advantage of any imminent bankruptcy legislation.
It’s not clear why the central bank quotes % arrears on a count basis. I use loan balance. So the 9.2% (count) is really 12.3% (value).
Your UK comparison table is very useful. Assuming the numbers are correct, UK Repossessions as a percentage of Arrears is 17.06%. The Irish Repossessions as a percentage of Arrears is 0.86%. If Ireland had the same (conversion) rate, we would have 12,000 repossessions. Had Irish banks applied this (uk) rate from 2007 on, our arrears statistics would look much better. (it’s Friday and I’m not going to attempt the sums!).
It’s difficult to guess at the level of those ‘not motivated to pay’ (/moral hazard), but ‘doing nothing’ is not helping matters.
@Ahura
you said
“It’s difficult to guess at the level of those ‘not motivated to pay’ (/moral hazard),”
true…. but it is even more difficult to define moral hazard in the context of a bailed out country. One that has only succeeded in implementing the austerity programs ordered by others. Until the government creates growth, and while the taxpayers own the bank, moral hazard is, well, just a nice expression.
The Irish obsession with ‘ not being welchers’ is almost amusing when you have lived and worked abroad for while, and I bet the Germans thank them for it. I’ve been on both sides of debt forgiveness in the US, and it generally results in a return to normal activity in the quickest way possible. Moral hazard arguments impede this progress. Look around.
Try the Icelandic side. Too late for Ireland, now.
http://www.reuters.com/article/2012/02/17/idUSL2E8DH5XA20120217?feedType=RSS
“Accelerated private sector domestic debt restructuring,” is the term Fitch used describing Icelands (Ice) bright future.
Maybe we just need to find words that make, welching, restructuring, progress, evolution, similar and palatable to the punitive obsessed irish economy.
Fair play to the Icelandic folk..BBB rated fancy that.
@ Eamonn…feel free to read my poems in a salty-sinused Dun-Laoghaire accent, it actually helps.
Unsustainable mortgages could be repackaged as home owner portion and bank equity portions, one of the proposals sometimes raised by us as having potential to assist home owners in their fight to save their homes would be the use of a twin track system by the banks in regards to their customers mortgages. By taking the current value of the house and working out the current Loan to Value at say 75% that reflects that latest value, this would then become the good loan part of the original loan
The remaining outstanding amount would then be put to one side and repackaged as the bad loan. There are a number of ways that this repackaging could be structured so as to help the owner to stay in the house, maintain an ownership position and enable the bank to recover a great deal of their money without recourse to repossession.