Level of long term arrears continue to increase in fourth quarter

Tuesday 04 March 2014 17.07
17.9% of total mortgage market in arrears
17.9% of total mortgage market in arrears

New figures from the Central Bank show that the number of mortgage accounts in arrears fell for the second quarter in a row.

The Central Bank said the number of mortgage accounts in arrears for "principal dwelling houses" eased by 3.3% to 136,564 in the fourth quarter of 2013 from 141,269 at the end of the third quarter.

This represents 17.9% of the total mortgage market.

The bank noted that the number of mortgages in arrears of less than 90 days fell by 5.7% during the fourth quarter compared to a fall of 5.5% in the third quarter. 

However, longer term arrears continued to increase with the number of mortgages in arrears for over 360 days reaching 60,422 - 7.9% of the total stock of mortgage accounts.

The Central Bank said this was driven by accounts in arrears of over 720 days, which rose by 1,755 to 33,589. These now represent 24.6% of all accounts in arrears. 

The number of buy-to-let mortgages in arrears dropped from 40,396 to 39,250 in the fourth quarter, today's figures show - 27% of the total of buy-to-let mortgages.

Today's figures show that over 84,000 mortgage accounts were classified as restructured at the end of December, up 4.3% from the end of the third quarter. 79.3% of these were meeting the terms of their restructured agreements.

The share of interest only arrangements of less than one year and reduced payment arrangements fell to 36% in the fourth quarter from 44% in the third, while arrears capitalisations and term extensions rose - accounting for 22% and 19% of total restructures respectively. 

A total of 168 properties were taken into possession by mortgage lenders during the final quarter of last year, of which 63 were repossessed on foot of a court order. The remaining 105 were voluntarily surrendered or abandoned. 

The Central Bank said that the bans were in possession of 1,014 repossessed properties at the end of last year.

Legacy issues remain

Dermot O'Leary, chief economist with Goodbody, pointed out that the level of mortgages in arrears of over 90 days fell in the final quarter of 2013 for the first time since the crisis began.

He said, however, that there were still large legacy issues that the banks have to deal with in the coming quarters, specifically the level of arrears over 720 days.

It was the only category that experienced an increase in the quarter.

"Improved domestic economic conditions are finally contributing to a reduction in mortgage arrears. While the banks now know the scale of the problem and are well-provisioned, the challenge is to implement realistic solutions for the unsustainable cases," Mr O'Leary said.

Philip O'Sullivan, chief economist with Investec, also pointed to the "striking divergences" between early and late arrears, with the large stock of arrears of more than 720 days a particular concern.

"The general economic recovery, in particular favourable labour market and residential property price trends and overall progress in terms of restructuring troubled mortgages, should help with addressing this problem," Philip O'Sullivan said.

"In all, we believe that mortgage arrears statistics should continue to record improvements over the coming quarters," he concluded.