KBC warning of increase in home repossessions
The head of KBC Bank Ireland expects home repossession rates to increase in 2015 and 2016 as the process - especially in relation to buy-to-let properties - is becoming faster.
The bank, which rapidly expanded its mortgage lending here to €450m last year from what was effectively a standing start in 2013, said that in most cases when the bank takes back possession of a property it has struck a deal with the borrower.
KBC Ireland chief executive Wim Verbraeken said rates of mortgage arrears had declined at the bank, but that in cases where customers could not "cure" arrears with new payments and where no sustainable debt solution was achievable, properties would be repossessed.
When a house was sold for less than the amount owed, KBC had no firm policy on whether to try to recoup the shortfall, he said.
The bank did not have "hard rules" and was taking a "very pragmatic" approach to such residual debt based on affordability, the Belgian banker said.
He said KBC had seen a reduction in overall arrears since the start of last year, including among those in long-term arrears of 90 days or more.
KBC was meeting the Central Bank targets for working though problem loans, he said.
"Most people are catching up," Mr Verbraeken said.
Tough new Central Bank mortgage rules that came into effect this week would have a limited impact on the market for a number of months because many house hunters already had mortgages approved under the old rules, Mr Verbraeken said. The rules will force most house buyers to come up with a 20pc deposit.
Last year KBC mortgages accounted for about 10pc of the total market, in line with its historic position, he said. The bank did not expect mortgage lending here to decrease, following adoption of the new regime, Mr Verbraeken said.
Banks, including his own, must now figure out how to work within the new rules, he said.
KBC has beefed up its Irish retail bank offering, including driving, home and consumer lending as well as insurance and savings and investment products.
"We want to become the main bank for customers," Mr Verbraeken said.
The Belgian-owned bank has pulled out of commercial and property lending here, but is working with about 800 remaining customers with historic debts.
KBC Group, Belgium's biggest bank, yesterday reported a fourth-quarter profit that beat expectations. Here, losses were €91m last year compared with €864m in 2013. The bank says it is on target to return to profit here in 2016.
Loan-loss provisions in Ireland would be €50m to €100m this year and in 2016, down from €198m last year and €1bn in 2013, the bank said.
The slowdown reflects the big upfront loss taken on asset values in 2013 and a recovery in property prices.