Rise in residential mortgage arrears

MORTGAGE BORROWERS showed further signs of stress in April as arrears on residential loans rose to 7.62 per cent from 6.65 per cent two months earlier within a pool of €54 billion in mortgages.

Ratings agency Moody’s tracks the pool of Irish residential mortgages, which amounts to more than a third of all Irish mortgages, used by seven banks as collateral to borrow through covered bonds.

Arrears of 90 days or more almost doubled over a year.

The pool contains loans at AIB, Ulster Bank, Bank of Scotland (Ireland), Bank of Ireland, EBS, Irish Life and Permanent, and KBC Bank.

Moody’s said the outlook for Irish residential mortgage-backed securities was negative based on rising unemployment that would push more borrowers into arrears.

The agency expects unemployment to rise to 14.4 per cent in 2011 from 13.5 per cent last year.

“Falling house prices will increase the size of losses on defaulted mortgages,” said Moody’s, which estimated house prices had fallen 40 per cent between September 2007 and March 2011.

The agency found 2.38 per cent of the mortgages had not been repaid for 360 days or more, up from 1.89 per cent last January and 1 per cent in April 2010.

The worst-performing mortgages were loans at First Active, a subsidiary of Ulster Bank, which showed arrears of 90 days or more of 12 per cent in April compared with 6.7 per cent a year earlier.

The best-performing mortgages within the pool were loans at Bank of Ireland and its subsidiary ICS Building Society where arrears of 90 days or more were 3.57 per cent, up from 3.2 per cent.

Irish Life and Permanent had the largest amount of loans in the pool, at €16.7 billion of mortgages.