Bankers warned thousands more mortgages have fallen into arrears

Charlie Weston Personal Finance Editor

THERE has been another surge in the number of homeowners who are behind on their mortgage payments.

The grim news on arrears was laid out by Central Bank officials to bankers, credit union officials and credit card company executives.

Figures for the level of arrears for the last three months of last year are due out tomorrow and are set to show an additional 4,000 households are unable to meet home-loan repayments.

It is expected the figures will show that more than 90,000 residential mortgage accounts are now three months or more behind on their repayments. This is up from 86,000 accounts last September.

Head of banking supervision at the Central Bank, Fiona Muldoon, told bankers and other lenders at a specially-convened meeting that greater efforts would have to be made to tackle the arrears issue.

It is understood she told bankers that there was deadlock at present as each bank was trying to protect its own borrowings and was reluctant to be the first to do deals with householders who have multiple loans, until all lenders agree a deal.

The meeting was called to try and seek a way to divide up loan losses among lenders.

At the meeting were AIB boss David Duffy, Ulster Bank's Jim Brown, Permanent TSB's Jeremy Masding and KBC Bank's John Reynolds, a senior Bank of Ireland official, along with head of the Irish League of Credit Unions, Kieran Brennan, and Kevin Johnson of the Credit Union Development Association.

Irish Banking Federation boss Pat Farrell, representatives from credit card company MBNA and head of the new Insolvency Service, Lorcan O'Connor, were also at the meeting.

The introduction of the new personal insolvency office in the summer is set to ramp up pressure on banks to do deals with over-burdened borrowers.

The Central Bank-initiated meeting was the first in a series to try and work out which lenders will take the most losses when those unable to meet their repayments have loans restructured.

Ms Muldoon said after the meeting: "Collectively those present agreed a path forward to progress the mutual objective of a framework for multi-borrowed distressed borrowers."

Credit-card providers and credit unions fear they could be big losers as efforts are made to prioritise mortgage repayments. Up to 25,000 people are expected to avail of the personal insolvency procedures in its first 12 months.

But bankers are understood to have expressed concern that they will eat up any spare reserves they have if too many people seek debt deals under the new insolvency rules.

Another meeting is set to take place this week to agree a framework for allowing some borrowings of heavily indebted householders to be written off if they meet strict criteria over five to seven years.

And banks were told to try to agree their own deals with mortgage customers ahead of the Insolvency Service coming into operation in the summer.