Wednesday 26 October 2016

Ignoring mortgage arrears crisis is not going to make it go away

Published 12/06/2016 | 02:30

Arrears nightmare: No end in sight Photo: Andy Dean Photography
Arrears nightmare: No end in sight Photo: Andy Dean Photography

We Irish have a long-standing love affair with home ownership - at one stage, 25 years ago, up to 80pc of households owned their own home, though this figure has fallen every year since then.

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For some, however, the dream of ownership has become a nightmare as they now find themselves in serious mortgage arrears. The psychological stress of being in arrears and knowing that you might lose your home is immensely difficult. The Housing Agency identifies the mortgage arrears problem as a continuing critical issue.

There are currently about 880,000 residential mortgages in Ireland - 743,700 are on principal private dwellings and 136,295 are on buy-to-let properties. Most of these mortgages are unproblematic; however, there are a substantial number in significant difficulty. Within this cohort of people who find themselves in mortgage arrears, there are many who are extremely vulnerable.

Almost 60,000 mortgages on principal dwellings are in arrears over 90 days - over half (58pc) of these are in arrears over 720 days (that's about two years). A further 120,000 of these mortgages have been restructured. For those in the buy-to-let sector, 23,334 mortgages are in arrears over 90 days (two-thirds of these are in arrears of more than 720 days) and 27,222 had been restructured.

We have identified this as one of the most substantial problems in the sector at the moment. Adding it all up, there are around 200,000 residential mortgages restructured or in arrears. This is an extremely precarious position for homeowners to be in and one that has far-reaching implications. It impacts on both families and financial institutions.

There is good news in that the number of mortgages in arrears is dropping; however, the number of mortgages in long-terms arrears is showing little sign of decline. Most concerning for the agency is that 16,000 of the restructured mortgages are again in difficulty.

It is vital that we do all we can to help people stay in their homes for as long as possible. We need to respond to households with unsustainable mortgages with long-term solutions. Expanding existing options such as mortgage-to-rent and converting properties to social housing need to be prioritised in order to ensure that people do not lose their homes and end up on local authority social housing waiting lists.

At a societal level, we also need to learn from this nightmare. Never again should home ownership be the worst financial mistake a family can make. Unaffordable housing leads to unsustainable lending and this results in huge financial hardship for families.

Housing must be affordable and lending responsible to ensure we do not go back to mistakes of the past. One thing is for sure: we cannot ignore the mortgage arrears issues that remain and hope they go away - they won't.

Sunday Independent

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