Banks Focused on Delivering Medium and Long-Term Solutions for Mortgage Arrears Customers

• Slowdown in number of new arrears cases

The Irish Banking Federation (IBF) and its members note from today’s Central Bank statistics on mortgage arrears that, while the total number of mortgages in arrears continues to increase, the rate at which this is happening is decreasing. This is reflected in a slowdown in the rate at which new customers are going into arrears which has been evident over a number of successive quarters. This easing in the pace at which new arrears cases are arising is welcome and we will look to future quarters for confirmation of the sustainability of this trend over time.

The Central Bank statistics show that 10.9% of all private residential mortgages are in arrears over 90 days. While most borrowers continue to meet their mortgage repayments, these statistics reflect the difficult economic circumstances in which an increasing number of customers find themselves. The financial difficulties facing some customers are also reflected in the numbers in arrears for less than 90 days, a newly-published statistic. Here again a decreasing trend is notable with the end-June figure down on the corresponding figure at end-March.

IBF members are continuing to assist customers in difficulties with a suite of short to medium-term solutions on a case-by-case basis; and this is reflected in the near 85,000 (84,941) mortgage accounts that have been restructured to date.

At the same time, lenders are increasingly focused on delivering workable, longer-term solutions for customers as appropriate. Considerable progress is being made by banks under their Mortgage Arrears Resolution Strategy (MARS) in accordance with Central Bank timelines. Piloting of various new loan modification options is now well underway and these can be expected to provide longer-term and more sustainable solutions for customers in financial difficulty. Rollout of the first of these various solutions can be expected later this year.

IBF member banks are also recording increased levels of customer engagement as well as a significant improvement in the quality of customer information provided through the Standard Financial Statement (SFS). Complimented by increased investment by banks in staffing, IT systems and engagement of international mortgage management expertise, this is driving a better level of outcomes for customers.

IBF strongly encourages borrowers who are under pressure with their repayments to communicate with their lenders at the earliest opportunity in order to find a workable arrangement that will assist in the management of their financial difficulties. To further facilitate this important early engagement, lenders are variously developing comprehensive outreach programmes to communicate and liaise with customers and these will be rolled out over the coming weeks and months.

IBF and its members remain concerned at the absence to date of any official remedy arising from the Justice Dunne judgement which has created an unintended legal impediment to banks’ ability to enforce security on residential property in situations where all re-mediation measures have failed and the mortgage is deemed unsustainable. These concerns have been communicated to the relevant government departments.

IBF Chief Executive, Pat Farrell, stated:
“It comes as no surprise that, unfortunately, the overall stock of mortgage arrears continues to grow and indeed is likely to do so for some months yet because of the economic and financial backdrop. However, the continuing reduction in the pace at which the stock has been growing is very welcome and we must hope that this trend will continue. Banks are continuing to increase their levels of customer support and to progress the rollout of longer-term solutions for borrowers experiencing financial difficulty in order to maximise the number of sustainable mortgages. The sector is also working closely with Government in support of the establishment of an independent Information and Advice Service for mortgage customers in arrears.”

Year-on-year Increase in New Mortgages for Home Purchase – the first since 2006

  • Home purchasers account for 4 out of 5 new mortgages
  • Evidence of stabilisation in mortgage market activity

The IBF/PwC Mortgage Market Profile, published today, shows that the number of new mortgage loans issued to First-Time Buyers and Mover Purchasers during Q2 2012 increased on a year-on-year basis – the first time both of these home purchasing segments have increased year-on-year since Q1 2006.

A total of 3,225 new mortgages to the value of €524 million were issued during the second quarter of 2012.  This represents a 22.6% increase on the number issued during the first quarter of 2012.  More significantly, while the year-on-year trend shows a 9.2% decrease in the total number of mortgages issued, both the First-Time Buyer and Mover Purchaser segments recorded increased activity year-on-year for the first time since 2006.  This continues the pattern of recent years of weak mortgage activity overall, but it is notable that the rate of contraction in such activity continues to slow year-on-year, as is evident from the following graph:

The key home purchaser segments of the market – first-time buyers and mover-purchasers – continue to dominate what is now a smaller market in terms of overall activity.  Together they account for more than four-fifths of all new mortgages issued.  In effect, 88% of all mortgage credit now goes to the home purchasing segments of the market.

Commenting on the latest data, Pat Farrell, IBF Chief Executive, stated:

“These latest figures show that contraction in activity continues to slow significantly and the second quarter of this year has actually recorded modest growth in both first-time buyer and mover-purchaser activity – something not seen since the first quarter of 2006.  Taken together with recent comments from property economists signalling stabilisation in house prices in key sectors of the Dublin market, we will be looking to the next quarter’s data for confirmation of the trend indicated in this quarter.  The period to the year end is key as mortgages taken out after 31st December next will not qualify for mortgage interest relief.

The IBF/PwC Mortgage Market Profile can be viewed on the web IBF-PwC Mortgage Market Profile Q2 2012

IBF/PwC Mortgage Market Profile – Data Series

The full IBF/PwC Mortgage Market Profile data series, from Q1 2005, is available online. To access the data click IBF-PwC Mortgage Market Profile Times Series Q2 2012

To save the data series to your computer, right-click on the link, select Save Target As.. or Save Link As…and save the file to the preferred location on your computer.

 Note: The Irish Banking Federation (IBF) is the principal voice of the banking and financial services sector in Ireland, representing over 70 member institutions and associates, including licensed domestic and foreign banks and institutions operating in the financial marketplace here.

Further Information: Felix O’Regan, Director Public Affairs, IBF, tel. 671531, 087 6481644