Central Bank Figures Show Growing Mortgage Arrears Problem in Ireland

on Dec 17, 2012

**Irish Mortgage Woes Worsen in Q3**

On Thursday (13 December 2012), the Central Bank announced that over one in six Irish home loans were not being fully repaid at the end of September, which is a rise of 5 per cent on the previous quarter of the year. The bank’s official report on arrears and repossessions for the third quarter of 2012 showed that the number of residential mortgages in arrears for 90 days reached 86,146 at the end of the three-month period, or a proportion of 11.3 per cent, which the bank said represented a 6.3 per cent rise on the previous quarter versus 7.1 per cent in the three months before that.

A further breakdown in the health of the Irish residential property market reveals that 49,482 home loans in the country were classed as being up to three months behind in repayments, while 18,745 mortgage accounts were classed as being between 90 and 180 days in arrears. Meanwhile, the number of restructured mortgages was 81,683, according to the Central Bank.

**Buy-to-Let Sector Also in Trouble**
Further figures from the bank showed that 26,770 of accounts in the buy-to-let sector were in arrears of more than 90 days at the end of September. This is the first time the Central Bank has revealed detailed figures on problem loans of investors who have bought properties as a buy-to-let investment. According to Thursday’s data, Ireland’s buy-to-let-sector represented 17.9 per cent of all outstanding mortgages in the third quarter, compared to 16.6 per cent at the end of June.

**Figures Come “As No Surprise”**
Commenting on the Central Bank’s latest report, the Irish Banking Federation (IBF) said that the increase in mortgage arrears comes “as no surprise”, reflecting the “difficult economic circumstances in which an increasing number of customers find themselves”. According to the IBF statement, however, the level of repossession in Ireland “remains very low by international standards”.

Indeed, according to official figures, repossessions in Ireland currently stand at 20 per 100,000 mortgages compared to 72 per 100,000 in the UK. At the beginning of September, Irish banks held 944 repossessed properties on their books. Forty-seven of them were repossessed through court orders, 154 were repossessed by lenders and 107 were voluntarily surrendered or abandoned during the third quarter of the year.
**Ailing Irish Real Estate Market to Cause “Awful Lot of Pain” for RBS**
In a report concerning the latest Central Bank figures, The Times announced today that the declining state of the Irish property market will cause an “awful lot of pain” for Royal Bank of Scotland (RBS), with 60 per cent of its mortgages in negative equity, according to an analyst Investec’s report.
RBS, which operates primarily as Ulster Bank in the Irish Republic and Northern Ireland, has a £18.9 billion Irish residential mortgage portfolio, the majority of which is in negative equity, while 38 per cent of mortgages have a current loan-to-value in excess of 130 per cent. According to Investec, the RBS balance sheet is now potentially in a worse state than that of Lloyds Banking Group.
As iNVEZZ reported last month, Lloyds sold an inherited £1.46 billion portfolio of Irish property loans to Risali Ltd, an entity affiliated with Apollo Global Management, for a tenth of the assets’ face value.