Revealed: Crash hurt mortgage holders far more than previously thought
New research from the Central Bank lays bare the true impact of the crash on homeowners.
It shows far more mortgage holders have had to get a deal from their lender to lower their repayments than previously realised.
The Central Bank said its latest research shows that close to 200,000 mortgage holders had to plead with their banks for deals to lower their monthly repayments.
This is much higher than the previously estimated figure of 120,000 that the Central Bank has been publishing up to now. Economists said this meant the scale of the crash on households has been even greater than captured up to now, as almost one-in-three mortgage holders has had to get their repayments lowered.
An economic letter by staff in the Central Bank shows that between 2009 and last year some 100,000 mortgage holders got a short-deal payment arrangement from their bank.
This is likely to see them paying interest only on the loan to lower the monthly amount due.
Another 100,000 are estimated to have gotten a longer-term deal to bring down repayments.
This is likely to involve capitalising the arrears. This means adding underpayments that have built up to the total amount of mortgage debt due and paying off the loan over a longer period.
A research paper by economist Fergal McCann states: "Relative to the 120,398 that are classified as being restructured by official Central Bank statistics, these numbers highlight that, when previously elapsed short-term arrangements are counted, the scale of mortgage modification in the Irish PDH [private dwelling home] mortgage has been even larger than measured by statistics on the currently restructured group of loans."
The economist warned there could be some double counting in the figures.
However, a spokesman for the Central Bank added: "There were close to 200,000 modifications overall."
In a separate economic paper, Mr McCann highlighted that over 260,000 tracker mortgages are vulnerable to future interest rate rises from the European Central Bank (ECB).
This would mean monthly repayments for the majority of these loans would increase by between €100 and €200 a month if ECB policy rates were to rise by two percentage points. The Central Bank also carried out research into why mortgage arrears rates, especially among those in arrears of more than two years, remain "stubbornly high".
It found that only six out of 10 of those who are in deep arrears had engaged with their lender by the end of last year.
People who are in arrears for less than two years are more likely to engage with their lender.
The regulator studied mortgage arrangements at AIB, Bank of Ireland, Permanent TSB, KBC, and Ulster Bank.