Slowdown in pace of increase in arrears is welcome, says IBF

The Irish Banking Federation (IBF) and its members note from today’s Central Bank statistics on mortgage arrears that, as expected, the overall level of private residential mortgage arrears has increased – but significantly the pace of that increase is further slowing.

The increase to 11.3% in the total number of private residential mortgages in arrears comes as no surprise, reflecting as it does the difficult economic circumstances in which an increasing number of customers find themselves.  However, the slowing pace of increase in arrears is welcome, with the Central Bank noting that:

  • there is an underlying decline in the number of accounts up to 90 days in arrears;
  • the pace of increase in arrears over 90 days has slowed;
  • the number of accounts 91-180 days in arrears fell for the first time (-0.1%);
  • the pace of increase in arrears over 180 days fell significantly.

It is also notable that the small decrease to 81,683 in the total number of restructured accounts is largely related to “a reclassification effect, resulting from the application of a more harmonised definition of restructures across all institutions”.  This emphasises the importance of full and constructive engagement by borrowers with their lenders so that workable restructured arrangements can be fully formalised.

The figure of 17.9% for buy-to-let properties in arrears of more than 90 days has been well flagged and widely commented on and thus comes as little surprise.  What is new, and indeed welcome, is the announcement that, in accordance with a Troika recommendation, the Government will now legislate to remedy the Justice Dunne judgement and provide again to lenders the ability to enforce their security in situations where all re-mediation measures have failed and the mortgage is deemed unsustainable.

The level of repossession here remains very low by international standards; currently standing at 20 per 100,000 mortgages compared to 72 per 100,000 in the UK (according to official figures).  Banks remain focused on maximising the number of sustainable mortgages.  Repossession remains a matter of last resort – for peoples’ homes in particular – and the sector will continue to take a responsible approach.

The Central Bank data also reflect for the first time the new loan modification and resolution options being provided to borrowers for longer-term and more sustainable solutions.  More longer-term solutions have been recently introduced by lenders and the number of customers availing of these solutions can be expected to increase significantly over time.

Commenting on the figures, IBF’s Director of Public Affairs, Felix O’Regan, stated:

“Given the ongoing economic and financial backdrop, it is not surprising that the overall stock of mortgage arrears continues to grow and is likely to continue that way for some months yet.  However, in line with today’s Central Bank figures, banks report that the underlying rate of increase continues to fall.  More importantly, this positive trend can be expected to continue over time – backed up by the very significant resources that banks have committed to working with their arrears customers.”

Contact: Nuala Buttner, Q4 PR, tel 085 1744275; IBF tel 6715311

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.