Thursday 22 August 2019

Lenders warned to tackle buy-to-let mortgage crisis

Charlie Weston and Donal O'Donovan

ALMOST one in three investor mortgages is in trouble, new figures have shown.

And the failure of banks to deal with buy-to-let mortgages and the arrears on residential homeloans risks bankrupting the country a second time, a senior central banker said.

Director of banking supervision Fiona Muldoon has revealed that 37,000 buy-to-let mortgages are in arrears -- payments are three months or more behind.

And another 11,000 investor mortgages have had to be modified as property owners can't meet the repayments.

There are a total of 150,000 investor mortgages.

The buy-to-let crisis is despite the fact that repayments on most of these are interest-only.

Ms Muldoon warned that the overall mortgage crisis -- whether investor or residential -- had to be dealt with for the greater good of the economy.

"Banking has failed once and Ireland is paying the price," she said.

When both investor and residential mortgages are counted, 167,000 loans are in arrears.

Another 51,000 mortgages have had to be restructured to reduce monthly repayments.

The value of the arrears is €35bn, with another €9bn in homeloan restructures.


Putting people who can't repay on interest-only was not dealing with the issue she said.

"If we do not effectively deal with the problem, extract value for the taxpayer/shareholder from the loan assets; if we do not continue as a society to operate in a repayment culture, then the bill becomes simply too big to carry."

She acknowledged that there were legal difficulties repossessing buy-to-lets at the moment, but this was not enough to account for the slow progress dealing with the issue.

"There are significant numbers of buy-to-let loans on interest-only tracker rates in deep arrears -- so what exactly is the commercial rationale for a 'wait and see?' strategy on these cases," she told the Irish Banking Federation conference.

Secretary general of the Department of Finance John Moran said there was no State policy against repossessions.

Mr Moran said there were situations where repossessions were going to occur and that people needed to change their expectations from the boom.

President of the Irish Banking Federation John Reynolds, who is also chief executive of KBC Bank Ireland, said that resolving arrears was "frustratingly slow" but that it reflected the scale of the problem.

Irish Independent

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