Early-stage residential mortgage arrears have fallen below 2 per cent for the first time in three and a half years, according to a new report from rating agency Fitch.

"The improved macro-economic environment is feeding through to the mortgage market as fewer borrowers are facing financial difficulty," says Andrew Currie, managing director at Fitch's Structured Finance team. "Fitch's latest arrears index highlights the polarisation in the market; generally even the late-stage arrears rates have plateaued or are falling, but portfolios with concentrations of loans with weaker features continue to deteriorate."

While Mr Currie notes that long-term arrears remain a concern for Irish lenders due to the sheer number of cases that still need to be resolved, “the changing sentiment and greater liquidity in pockets of the housing market provides more opportunities for positive resolution outcomes.”