Monday 18 December 2017

Tracker borrowers in danger from rate rise -- IMF

Emmet Oliver

THE IMF has again raised concerns about the impact of higher interest rates on tracker mortgage-holders, saying people who took these mortgages in 2006 and 2007 were "particularly vulnerable''.

The latest report from the Washington-based organisation contains several warnings about the threat from higher interest rates to the economy, and consumer spending in particular.

Tracker mortgages -- which track the ECB's main interest rate -- have been insulated from recent mortgage rises, but the IMF pointed out that this may not continue.

"Interest rates for tracker mortgages linked to the ECB main refinancing rate remain low, but additional pressure may arise should this interest increase," the report said.

Tracker mortgages make up about half of the bank's mortgage loans, said the IMF, but a large number were given in the last years of the boom, when house prices were at their highest.


"First-time buyers who bought at the height of the real estate boom in 2006/2007 are particularly vulnerable," said the organisation's report.

On the general picture in Ireland the organisation said: "The number of mortgages in arrears has been rising steadily, fuelled by high unemployment and growing economic stress on households."

The organisation also discusses in the paper the problem of household debt and helping those unable to pay their mortgages.

Some householders would simply have to trade down, while others might have to surrender their homes on a voluntary basis in the period ahead, said the IMF.

Because Irish borrowers remain liable for the unpaid portion of their mortgages even if the house is sold or foreclosed, the IMF suggested additional steps needed to be taken.

Questioned yesterday, Ajai Chopra, head of the IMF Ireland mission, refused to discuss what kind of losses on mortgages were possible in Ireland.

He said fresh stress tests needed to be done, but he was aware that Ireland had a lot more variable and tracker mortgage loans in the system than many other countries.

Irish Independent

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