Banks must tackle home debt
Yesterday's figures from the Central Bank, showing that the level of mortgage arrears is still rising rapidly, should serve to dampen any premature hopes of a recovery in the housing market. With over one-in-10 of all homeloans now more than 90 days in arrears, it is clear that we are staring at an unfolding social tragedy, which, unless urgent action is taken, could result in tens of thousands of people being forced out of their homes.
According to the Central Bank's latest mortgage arrears statistics, 77,630 mortgages, 10.2pc of the total, were more than 90 days in arrears at the end of March. This means that the number of mortgages more than 90 days in arrears has increased by more than 28,000, or more than 56pc, over the past 12 months.
Unfortunately, these statistics don't tell the full story. A further 38,688 mortgages had been restructured but were now compliant with their revised repayment terms. Add these and the number of mortgages restructured and/or in arrears rises to 116,288, more than one in seven of all homeloans.
But what about mortgages that are less than 90 days in arrears? Inevitably this is something of a moveable feast as these mortgages will, with the passage of time, automatically migrate to the over-90-day category. However, the steady increase in the number of mortgages more than 90 days in arrears means that the number of mortgages getting into difficulties for the first time is being constantly replenished.
For what it is worth, the Central Bank told the Oireachtas Finance Committee last October that a further 46,600 mortgages were in arrears for less than 90 days at the end of June 2011. Given all that has happened since, it is reasonable to assume that this number hasn't declined appreciably since then. What this means is that the total number of mortgages that are either in arrears and/or have been restructured is probably in excess of 160,000, more than one-in-five of the country's 764,000 homeloans.
That is a truly frightening statistic. We are already beginning to see the human cost with the Central Bank revealing that a further 170 homes were repossessed by lenders in the first quarter of 2012. Unfortunately the banks seem to be behaving like rabbits in the headlights -- either unwilling or unable to do anything. This is despite last year's bank recapitalisation providing the Irish-owned banks with sufficient capital to absorb mortgage losses of more than €9bn.
It is now crystal clear that a large number of mortgages will never be repaid in full -- particularly vulnerable are the 41,054 restructured mortgages that have fallen into arrears a second time and the 59,437 mortgages more than 180 days in arrears (there is almost certainly a significant overlap between these two figures).
If the banks are unwilling to deal with this then the Central Bank must use the powers available to it to force them to do so.