| 16.6°C Dublin

Seven in 10 loans in trouble at sub-prime lender

Accounts for the company used by Start Mortgages to finance part of its aggressive 'sub-prime" home loans show seven in 10 are in trouble.

At the height of the boom, Start Mortgages bundled up hundreds of millions of Irish home loans and sold the debt on to investors in the bond markets through a company called Lansdowne Mortgage Securities No 1.

Accounts just filed show that 26pc of the remaining €120m borrowers bundled together in Lansdowne 1 are so far behind on their loans that they are regarded as "impaired", suggesting real fears that the debt can never be recouped.

Another 46pc of borrowers are in arrears on their home loan, many by more than a year, but the company still considers the debt will be recovered.

Fewer than one in three of the Lansdowne 1 mortgages is not either classed as being in arrears or impaired, according to the accounts.

With so many of its borrowers behind on their debts, it is no surprise that Start Mortgages has become a frequent visitor to the courts.

The lender was behind one in three of the 124 repossession orders handed down by the High Court in the first six months of this year, according to figures from the courts service.

Nine lenders, including big players AIB and Bank of Ireland, were responsible for the other two-thirds of cases.

Newcomer Start was one of the more aggressive lenders in Ireland during the property bubble, often making home loans when even gung-ho Irish banks were unwilling to lend.

The loans came at the cost of higher interest rates than traditional lenders charge.

Astonishing

It has been no surprise that Start has suffered higher than average arrears, but the scale of the Start crisis is astonishing.

Both arrears and impairments have grown rapidly since 2011, according to the accounts.

In the year to the end of March, Lansdowne 1 wrote off around 11pc of value off its loans, reflecting the risk of losses from bad debts.

Revelations about the massive scale of problems among Start borrowers come as the European Commission warned yesterday of the need to intensify efforts to implement new personal insolvency rules, its latest assessment of the bailout programme.

Lansdowne No 1 contains mortgages used to buy homes between 2004 and 2006 -- close to the height of the boom. At one stage it contained €370m of home loans.

Irish Independent