MORTGAGE DEFAULTS rose again in May, according to an analysis of mortgage-backed bonds by ratings agency Moody’s.

The report shows that 4.08 per cent of the homeloans contained within the bonds were in arrears by more than 90 days in May. This compared to 3.8 per cent in March and 2.36 per cent in May 2009.

Moody’s said the rising trend does not show “any sign of abating”, with the proportion of loans in full default also rising.

The figures show that, within the nine featured mortgage-backed bonds, the percentage in default by more than a year rose from 0.9 per cent in March to 1.05 per cent in May. The corresponding figure a year ago was 0.55 per cent.

The agency pointed out that the lengthy repossession procedure in Irish courts tends partly to contributes to higher arrears trends.

Moody’s noted that repossessions “remain limited” within the pool of loans it examined because Irish lenders are “encouraged to assist cash-strapped borrowers” rather than repossess properties. Lenders are also constrained by a Code of Conduct which imposes a one-year moratorium on legal proceedings.

Earlier this month, an expert review group on mortgages told the Government this moratorium should not be extended.

Data compiled by the Financial Regulator showed in May that one in every 25 Irish residential mortgage holders was more than three months in arrears on their repayments.

Moody’s has found that “many” borrowers are repaying only the interest portion of their loan, thus leaving the larger capital element outstanding.

The highest 90-day delinquency rate was recorded within First Active loans, followed by Bank of Scotland (Ireland) and EBS. The lowest rate was found within AIB mortgages.

First Active also recorded the highest rate of outright default, followed by EBS.

Moody’s said its outlook for the Irish residential mortgage-backed securities market is negative, noting that falling house prices have reduced the “equity cushions” available to borrowers.