RESIDENTIAL DEBT:ONE IN 20 residential mortgages is now in arrears, as the number of people falling behind on mortgage repayments rose again in the second quarter of the year.
According to the Central Bank, of the 789,914 residential mortgages currently outstanding, almost 5 per cent, or some 36,438 mortgages, are now in arrears for 90 days or more – an increase of 12.7 per cent on the first quarter of 2010. Since the Central Bank started collating this information in September 2009, the level of mortgage arrears has increased by 38.7 per cent.
According to Ronan O’Driscoll, a director with property agents Savills, one of the more worrying aspects of the statistics is the number of people falling into long-term arrears. While more than 1,000 homeowners fell into arrears of 90 days or more for the first time during the second quarter, the number migrating to long-term arrears grew by almost 3,000. Overall, some two-thirds of total arrears, or 24,797 mortgages, were more than 180 days in arrears at the end of June.
“The latest figures have shown the greatest increase in the long-term arrears, suggesting that the number of people with arrears over 12 months is ballooning,” he said.
The average level of arrears is also on the rise, up by € 22 million, or 44 per cent, on the first quarter for those in arrears of between three to six months, and by €24 million, or 52 per cent, since last September.
Repossessions fell slightly in the second quarter, down by 5.5 per cent to 86 from the first three months of the year, 20 of which were repossessed on foot of court orders.
According to Noeline Blackwell, director general of the Free Legal Advice Centres, this decrease could be due to the 12-month moratorium on repossessions which began last February.
The latest statistics also point to a slight increase in the number of people voluntarily surrendering their properties, up to 66 from 64 in the first quarter.
However, as Ms Blackwell pointed out, “handing back the keys of the property is not the same as handing back the problem”, because until the property is sold, homeowners still have obligations to the bank, and can be charged interest as well as the cost of insurance and repairs carried out on the property.
On top of this, if the sale price does not match the value of the mortgage outstanding, homeowners could also be liable for the shortfall. During the second quarter, banks disposed of 45 properties, leaving them with 496 repossessed residential properties, but there is no indication as to whether sale prices achieved had cleared the relevant outstanding mortgages.
Arrears are set to rise even further over the coming months. On Tuesday, Irish Life Permanent indicated that it did not expect its level of arrears to level off until the end of the year.
The Central Bank figures do not give an entire picture of the true scale of the difficulties, as they do not take into account the number of people who have rescheduled their mortgages, or worked out an arrangement with their lender.
KBC mortgage securities loans in arrears over 90 days double
IN LINE with the Central Bank’s latest statistics, mortgage arrears are also on the rise at KBC Bank Ireland. According to Moody’s Investor Services, the proportion of loans more than 90 days in arrears in a portfolio of € 9.8 billion in debt securities, which are backed by Irish residential mortgages, has doubled since June 2009.
In a note released yesterday, indicating that it had downgraded residential mortgage-backed securities (RMBS) issued by KBC’s securitisation vehicles Phoenix Funding 2 and Phoenix Funding 3, the rating agency said that mortgages in arrears of more than 90 days had increased from 2.6 per cent to 5.2 per cent of one portfolio, and by 2.2 per cent to 4.5 per cent of the other, in the year to June 2010. Moreover, the rating agency revealed that 55 per cent of loans in the Phoenix 2 portfolio and 38 per cent in the 3 portfolio are currently in negative equity.
However, in line with the wider trend outlined in the Central Bank statistics, mortgages in KBC’s RMBS portfolios have experienced limited repossession to date.
“The negligible level of repossessions to date in the Irish mortgage market is associated to the lengthy foreclosure process in Ireland, as well as to the moratorium on legal proceedings introduced by the Irish Government in February 2009,” Moody’s said.
Moody's does not expect the arrears level in these transactions to stabilise before 2011, given the "expected increase in unemployment projected for 2010 as well as further deterioration of the Irish housing market". FIONA REDDAN
