Monday 17 December 2018

Laura Noonan: Gloomy, ill-informed 'experts' are talking through their hats

Laura Noonan

IN the dying days of pre-bailout Ireland, UCD economist Morgan Kelly claimed the mortgage crisis was so severe it put Ireland "on the cusp of a social conflict on the scale of the Land War".

Since his dramatic warning in late 2010, the headline numbers around mortgages have gotten solidly worse; 10.2pc of households are in arrears now, as against 5.66pc in December 2010, according to official figures.

Mr Kelly's fears of a mortgage timebomb have been almost universally adopted, as politicians of every ilk speak of the acute suffering of struggling homeowners and economists warn of the impending armageddon that will engulf our banks.

Bombarded by that dialogue, the public has been left with the impression that one in 10 mortgages isn't being repaid and will never be paid -- and that the problem could get far, far worse before Ireland emerges from its financial abyss.

The problem is that most of these venerable experts are talking through their hat.

Yes, mortgage arrears have risen steadily over the last three years, and yes 10.2pc of households are now classed as owing more than 90 days of overdue mortgage payments.

But you need to know a lot more than that to understand what's really going on and how deep the crisis is or isn't.

You need to know how many of the people in arrears are making some payments and how many are making no payments.

You need to know how many of those who aren't paying simply can't and how many of the defaulters are able to pay but choose not to.

You need to know how many people who can't pay are afflicted by temporary blips, such as unemployment, that's likely to reverse, and how many people have mortgages so big they'll never be in a position to meet their repayments.

You need to know how many people struggling under mortgage debt are also being weighed down by short-term debt such as credit cards and car loans, and how many would be able to pay their mortgage once this debt is gone.

You need to know how many people classed as being in arrears are in trouble now, and how many missed a few payments a year ago and are still "in arrears" because they haven't yet paid down all the old arrears.

An exhaustive trawl by the Irish Independent has revealed that the vast majority of this information is neither publicly available nor reasonably obtainable.

So it seems highly improbable that the pundits have it at their fingertips.

Many banks claim not to know the answers. Those that do won't provide the information publicly, and most wouldn't give it even under the protection of anonymity.

The Central Bank has, very recently, gotten information about the number of mortgages that are 'unsustainable' and are unlikely to ever be paid down. None of this has been made public yet.

The Department of Finance, where much of the government's banking strategy emanates from, doesn't have most of the information either.

A material improvement will come later in the summer when the Central Bank publishes the results of a survey of 2,000 households in arrears.

This will shed light on the financial circumstances of those people and allow a more meaningful judgment on how deep the arrears crisis actually goes.

Until then, dramatic proclamations should be treated with caution.

Irish Independent

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