Residential mortgage default levels still on rise

THE NUMBER of defaults in Irish residential mortgages continued to rise in October, according to the latest statistics released yesterday by ratings agency Moody’s.

The 90-plus day delinquency rate increased to 5.38 per cent in October from 5.14 per cent in September, Moody’s said.

The 360-plus day delinquent loans, which are used as a proxy for defaults, accounted for 1.47 per cent of the outstanding portfolios in October.

This was up from 1.38 per cent in September. This percentage rate has more than doubled in the past 12 months, the figures show.

Moody’s tracks €40.9 billion in Irish residential mortgages from AIB, Bank of Scotland (Ireland), Bank of Ireland/ICS, EBS, Irish Life Permanent, KBC and Ulster Bank/First Active.

Its latest figures show that 9.89 per cent of First Active’s €3.49 billion in residential mortgages are 90 or more days in arrears.

Bank of Scotland (Ireland) was next worst, with an arrears rate of 6.08 per cent.

AIB’s arrears rate was 1.28 per cent while Bank of Ireland/ICS had a rate of 2.72 per cent.

These figures, however, only relate to residential mortgages that were sold to investors as part of bond issues.

Residential market defaults have come into focus recently as analysts and economists seek to evaluate the level of default that Irish-owned banks might have to account for in the future.

This could have a significant impact on their capital ratios and potentially result in further state aid being required to shore up their already stressed balance sheets.

The Central Bank will carry out an updated stress test to assess the level of residential mortgage arrears in the Irish-owned banks for the purpose of their capital ratios, with the results expected in the first quarter of the New Year.

Residential mortgage defaults has emerged as an area of concern for the International Monetary Fund in the context of the financial bailout agreed with Ireland.

On December 17th, Moody’s downgraded Ireland’s foreign- and local-currency government bond ratings by five notches to Baa1 from Aa2.