The number of people in mortgage arrears is accelerating and set to get worse as ECB rates are expected to go up five times in two years.
Ratings agency Moody’s calculates that by December more than 45,000 home owners had failed to make their monthly payments for 90 days or more.
The agency’s figures are significantly higher than the last figures available from the Central Bank issued in December that showed that 40,000 home owners were in arrears.
It is estimated another 70,000 of Ireland’s 790,000 mortgage holders have been forced to make deals with their banks involving a variety of money-saving options ranging from interest-only payments, to capital payment holidays.
While the banks are required by law to enter talks with struggling home owners, some are still reluctant to do so in a meaningful way as they struggle with losses.
Recently, KBC made it clear it would not be cutting deals to write off capital for buy-to-let customers. And Permanent TSB upped its fixed rate mortgage by three per cent to forec those coming off fixed deals into standard variable products which it can then increase as it wishes.
“What is of particular concern is the latest arrears reports do not factor in the most recent interest rate increases announced by several banks (which are still ongoing) on their standard variable rate mortgage customers.
"In some cases, lenders have increased interest rates by 1%. Equally, it does not factor in the affect of the introduction on the Universal Social Charge, which has resulted in a reduction in net take-home pay." said Frank Conway, director with moneycoach.ie.
ECB base rate expected to go up five times in two years
Those on variable and tracker mortgages will face further hikes by the end of the summer, when the European Central Bank is expected to increase its rates.
Ulster Bank said this week it believes the ECB will increase the base rate by a quarter per cent five or six times over the next two years. This would take the base rate up to 2.25% or 2.5% - pushing standard variable rates close to around 7% for many customers. This rate has not been seen since 1994.
An estimated 400,000 customers are on tracker mortgages in Ireland with another 200,000 to 250,000 or so on variable rates.
There are fears that fixed rates will disappear from the market altogether forcing the remaining mortgage holders onto variable rates.
For the 250,000 mortgage holders on standard variable rate loans, they are the most vulnerable, with two sets of increases to carry (from their banks and the ECB bank as well). It's mortgage madness" said Mr. Conway.
Three lenders have already pushed up their variable mortgage rates this year, with two lenders effectively closing off the option for homeowners of choosing a fixed-rate mortgage.
