Arrears on Irish residential mortgages which have been packaged into bonds and sold to investors have increased due to fears of a prolonged recession, according to a report from ratings agency Moodys.
It said non-payments of 90 days or more on such mortgages reached 2.3 per cent in the second quarter, up from 1 per cent compared with the same period in 2008.
Moody's also said arrears of over 360 days on Irish residential mortgage-backed securities (RMBS) stood at 0.37 per cent at the end of the second quarter, compared with 0.14 per cent a year ago.
“The over 360 days delinquency trend is a lagging indicator, which means the full effects of the strong economic deterioration may not yet be fully reflected,” said Georgij Ludmirskij, senior Moodys associate and co-author of the report.
“In the near future, repossessions are unlikely to lead to any significant reduction of the over 360 days delinquencies, as they are considered a last resort.”
“The more common reduced payment schemes and payment holidays will not reduce the amount of already delinquent loans,” he added.
The rating agency also cautioned that as house prices continue to fall more Irish borrowers will face negative equity.
Moodys added that the “risk of borrowers becoming unemployed continues to increase”.
"While leading economic indicators do not show any signs of recovery in Ireland, the performance of mortgages may not yet reflect the full depth of the current recession," the report said.
Moodys is the second ratings agency to report a rise in arrears on Irish RMBS.
In July Standard and Poor’s said Irish RMBS arrears had risen to 3.9 per cent in March, compared to from 2.1 per cent 12 months ago.
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