Slowdown in numbers falling into mortgage problems at IL&P
Published 19/05/2011 | 05:00
THE State's largest mortgage lender is seeing a slowdown in the numbers getting behind on their repayments.
This has led to tentative hopes that the rise in the arrears at Irish Life & Permanent (IL&P) could be about to ease off.
Sources close to the lender said yesterday the number of homeowners starting to get into arrears continues to rise, but at a slower pace.
There are now 5,000 mortgage holders who are in the early stages of arrears -- they are less than three months behind on their repayments.
The company's mortgage lending unit Permanent TSB actively encourages those who are about to get into arrears, or those who are in arrears, to sit down and agree a repayment schedule to reflect the crash in incomes. This is helping homeowners to avoid getting behind on their repayments.
However, the bank said that despite their efforts to work with struggling mortgage holders, there had been a 17pc rise in the number who are three months or more in arrears. Some 13,500 mortgage holders are three months or more behind on their repayments.
The number of residential homeowners in arrears is about 6pc of the lender's mortgage book.
Mortgage brokers said the spike in arrears at Permanent TSB was not a surprise given that the bank had pushed up its variable rate mortgages by 1pc at the start of the year.
This meant that someone with a €200,000 mortgage saw their monthly repayments rise by €115, and this was before the European Central Bank (ECB) pushed through its own rate rise in April.
However, some experts pointed out that 94pc of the lender's mortgage holders were still managing to meet their repayments.
Frank Conway of personal finance website MoneyCoach.ie said the 1pc rise in Permanent TSB's variable rate was just one in a series of rate increases announced by the lender since August 2009.
Overall, the lender has increased charges on standard variable rates customers by 2.5pc. This was before the ECB began increasing charges in April.
"I expect arrears at Permanent TSB will continue to deteriorate in the months ahead. This will be as a result of rising rates at the ECB and rising inflation," Mr Conway said.
IL&P said it believed the worst of the recession was over in Ireland, but it expected the recovery in 2011 to be modest with continued weakness in domestic demand and consumer sentiment.
Formed from a merger more than 12 years ago, IL&P is set to break itself up. The life assurance unit would either sell shares on the stock exchange or be sold in a trade sale, chairman Alan Cook said.
This implies the company may raise about €1.5bn itself and require another €2.5bn from the State.
"This will have huge consequences for our shareholders," he told investors at yesterday's annual general meeting. "To say this turn of events is disappointing would be a huge understatement."
Shareholders repeatedly urged Mr Cook to fight the regulator's demands for a €4bn recapitalisation.
Mr Cook promised to raise their concerns, but offered no reason to believe the Government would change its mind, adding that the State's capital target was legal but unfair.
Irish Life chief executive Kevin Murphy said it was "too early" to form a view on retail life policy persistency rates, a gauge of how customers are maintaining policies.
Retail policy lapses in the first quarter were 10 percentage points ahead of a year ago, the company said.
Irish Life would have "a better view" on persistency when it published interim earnings figures in the summer, Mr Murphy said in a conference call with analysts.