More homeowners face going into arrears as bank interest rate rises hit home

Interest rate rises are leading to more mortgage holders falling behind with their payments. Stock image

Charlie Weston

More homeowners are finding themselves in arrears on their mortgages as the interest rate rises begin to bite.

The spike in people facing financial difficulties comes as a result of the Bank of Ireland raising its fixed mortgage rates for the third time since last summer.

The number of mortgage holders behind on their payments in the three months to last December increased by 1,000 when compared with the previous quarter, the Central Bank said.

Statisticians at the bank said the rise in customers failing to pay home loans was due to what it called “early arrears”. This refers to people who have just begun to get behind on their payments.

David Hall of the Irish Mortgage Holders’ Organisation, which helps people in arrears, said: “This is the first time in 10 years we have seen an increase like this in the numbers going into early arrears.”

He said he had seen a sharp rise in homeowners contacting his organisation about “pre-arrears” – people fearing they were about to go into arrears.

“They are being impacted by the cost-of-living crisis and rising mortgage rates,” he said.

About 38,000 people whose mortgages are owned by vulture funds are being hit with huge rises in European Central Bank rates.

Some are now on rates as high as 9.25pc, leaving them no longer able to meet their repayments.

There have been six ECB rises, and these people are on variable rates. Funds do not offer fixed rates, and these “mortgage prisoners” are unable to switch because they have been in arrears in the past.

The rise in those getting into arrears comes as Bank of Ireland is again putting up its mortgage rates.

The bank said the mortgage move follows cumulative increases of 3.5 percentage points in ECB rates since last July.

All fixed rates for new customers, and existing customers who want to lock in to a new fixed rate, are to go up by 0.5 percentage points.

Variable rates and tracker rates remain unchanged.