Monday 20 November 2017

Mortgage arrears to rise for another year

Rating agency predicts problem will peak in 2014

Charlie Weston Personal Finance Editor

THE number of people in mortgage arrears will keep rising this year and will not peak until next year, a new report from rating agency Fitch has predicted.

The agency said that the numbers falling behind on their mortgages at AIB and Bank of Ireland have slowed down.

But the overall level of arrears will keep rising until some time next year, Fitch said in a new report on Irish banks.

Some 126,500 residential mortgage accounts are in some form of arrears, according to Central Bank information.

And a new survey has found that most people in mortgage distress have repayments so high they represent a third or more of their after-tax income.

Paying more than a third of your income on a mortgage is considered to be too high by experts, and likely to lead to financial problems.

People do not trust banks to offer them one of the new personal insolvency options that would see some debt written off, a new survey of people in mortgage trouble has revealed.

More than seven out of 10 people who responded said their mortgage repayments represent 35pc or more of their after-tax income.

The survey, commissioned by insolvency service Neo Financial in Dublin, was conducted among people who had downloaded a guide to the new personal insolvency regime.

Paul Carroll of Neo Financial said banks were eager to do deals with over-borrowed homeowners as long as this did not involve one of the new personal insolvency options.

Under a personal insolvency arrangement a homeowner who can no longer meet their mortgage and other repayments can get debt written off if they stick to an agreement repayment schedule over six years.

But Mr Carroll said banks were trying to avoid formal personal insolvency deals.

INSOLVENCY

"The banks have been making an effort to come to arrangements with clients in advance of the insolvency act being available. It is my experience that these agreements are less beneficial to the client than personal insolvency and many would be much better off and are better candidates to apply for this new Personal Insolvency Act.

"In fact, bearing in mind that 71.43pc of people surveyed said their mortgage payments were more than 35pc of their income, clearly many would be better off going this route."

David Hall of the Irish Mortgage Holders' Organisation advised homeowners in mortgage arrears to take advice before signing up to an offer from the bank like a split mortgage. He called on the Central Bank to force lenders to publish the criteria being used by lenders to assess whether a homeowner is suitable for the likes of a split mortgage.

A split mortgage is an arrangement where part of the mortgage is "warehoused". Payments are made on the balance.

The idea is that repayments are reduced for five or 10 years to allow homeowners to get back on their feet financially.

Irish Independent

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