This week the Central Bank published the latest data on repossessions and mortgage arrears for the period to the end of June 2011, which showed that 7.2 per cent (55,763) of private residential mortgage accounts are in arrears for more than 90 days.
At the end of March 2011, 49,609 accounts (6.3 per cent of the total) were in arrears, which shows a gradual increase for the June figures.
The figures also show a total stock of 69,837 residential mortgage accounts that were categorised as restructured at the end of June 2011. Of this total, 39,395 (56 per cent) are not in arrears and are performing as per the restructured arrangement. However, the balance of restructured accounts, (30,442 approximately 44 per cent), have arrears of varying degrees. This means that 95,158 accounts are either in arrears for more than 90 days, or have been restructured and are not in arrears as at the end of June 2011.
During the second quarter to the end of June 2011, mortgage lenders applied to the courts to commence proceedings to enforce the debt/security on a mortgage in 209 cases.
The Director of Consumer Protection, Mr Bernard Sheridan, has encouraged consumers struggling with mortgage repayments to make contact with their lender as early as possible so as to avail of the Central Bank’s revised Code of Conduct on Mortgage Arrears. He said: "The earlier you make contact with your lender, the more likely you are to come to a manageable solution. The figures at the end of June 2011 show that lenders have agreed arrangements with their customers on almost 70,000 accounts."
Money Advice and Budgeting Service (MABS)
Mr Michael Culloty, Nation Social Policy and Communications Officer for the MABS, said that up to 50 per cent of the people coming to them now have mortgage issues.
“It may not be the reason for them approaching us in the first place, it may be an electricity or gas bill. Very often people approach us when the most pressure is being placed on them, so if there is a disconnection then they will come to try and resolve that.”
According to Mr Culloty, in 2008 around 25 per cent of people contacting the MABS had mortgages, and prior to that it was even less. “This is kind of a new phenomenon for us…we have always dealt with mortgage debt but now it is with greater volumes, and the complexity of the issues are greater,” said Mr Culloty.
With respect to what kind of help MABS are able to provide, Mr Culloty said: “A lot of people are able to help themselves because they would have been in good jobs before they came to the situation they are finding themselves in now, through unemployment, or reduced income. We are advising everyone to talk to their mortgage supplier.” He said that the MABS could also enter into that process on the borrowers behalf if requested to do so.
For many, the payment of their mortgage is their priority, and they may therefore run short in other areas of finance. With respect to this phenomenon, Mr Culloty said: “We encourage people to get in touch with their mortgage supplier and to make out their standard financial statements, in that way they will be indicating to the mortgage supplier how much they need to retain for ordinary basic living conditions, and also how much they can afford to pay towards their mortgage in the medium term.
“Income retention is something that is very important. We feel that not enough people are giving enough attention to that, not just from the debtors point of view but also from the creditors point of view…some creditors may be wanting to extract as much as possible without due recognition of what is needed to be retained by a family in order to exist,” said Mr Culloty.
The Irish Banking Federation (IBF) says that the increase in arrears figures is “the expected outcome of a deteriorating economic situation for some borrowers, and it illustrates that mainstream lenders are working responsibly with their customers to manage the situation where the basis for doing so exists.”
“These latest official figures show that IBF members are effectively applying the statutory Code of Conduct on Mortgage Arrears, the Standard Financial Statement and other voluntary measures to work constructively with customers in difficulty,” said Pat Farrell, IBF Chief Executive. “As a result, the figure that we would expect to see increasing – namely the number of restructured mortgages – is doing just that. And this is where the focus of IBF member institutions will most usefully remain.”
Speaking on NewsTalk radio this week, Mr Farrell ruled out debt forgiveness as a possible solution to the mortgage arrears issues seen to date. He said that he did not believe that debt forgiveness was a solution: “We think that it would cause much more problems than it would solve,” he said. He believes that the deferred interest scheme will help in this area.
