7% of Mortgages in Arrears - Todays Indo

Rabidlamb

New article up on Indo site:
http://www.independent.ie/business/personal-finance/property-mortgages/property-prices-down-125pc-but-decline-not-so-rapid-2860452.html

A few nuggets that stood out.

Meanwhile, new figures from the Central Bank today reveal that over 7pc of mortgages in Ireland are in arrears.
The new data reveals that 55,763 mortgages were in arrears at the end of June, an increase of almost 6,000 since the end of March.

The latest figures also showed that 69,837 loans had been restructured in some way, with borrowers either just paying their interest, or some having their loan extended, while others were not paying any interest at present. This is up nearly 7,000 on the March figures.
According to the Central Bank, 39,395 of these accounts are not in arrears and are performing as per the restructured agreement.
At the end of June there were 777,321 private residential mortgage accounts held in this country with a total value of €115bn, the Central Bank said.

I remember a Frontline programme last year where the figure for arrears was quoted at 2%, this problems seems to be accelerating rapidly.
As the live register hasn't gone up considerably it's must be explained by one of these factors:
(1) People have eaten through their savings.
(2) People have had a reduction in income.
(3) Interest rate hikes.
(4) People have just given up paying full whack & want a life.

Where will this figure end I wonder ?.

whatdoicare

Got a letter in the door just now informing me of a hike in my variable rate for like the fifth time this year - It's getting a bit ridiculous, surely if the banks stopped upping the interest rate those who are just hanging on can keep hanging on and pay away.
Wouldn't that be better for the banks financially speaking than just letting people slip into debt and nothing getting paid?

Then again, I'm just a joan soap, what would I know.

Mr.Micro

The interest rates are still rock bottom compared to some years ago. In reality the rates should be 9 to 12%. I cannot believe that people thought that the rates are always going to be low when they took out mortgages.

whatdoicare

I know this, my parents paid upwards of 14% in their time but it was on a mortgage of 25,000 as opposed to my 150,000.
I didn't expect rates to stay the same (hence my small mortgage by todays standards and the fact that I am well able to pay the 5 price hikes) but really, they can't have both - a high interest rate and paying clients, they have to choose which one they want.
Noone in reality is gonna be able to pay 12% on a mortgage of the average 200,000 if they are already struggling.

Rabidlamb

Mr.Micro wrote: »

The interest rates are still rock bottom compared to some years ago. In reality the rates should be 9 to 12%. I cannot believe that people thought that the rates are always going to be low when they took out mortgages.

There will have to be a 2 track approach taken by the banks.
Those who bought during boom & now in high NE cannot have interest rates exceed some given value, say 6%.
Those who buy now in deflated market, 10%+.

drunkmonkey

Well the good news is 93% are not in arrears.

Dig into those figures and see how many are second home, speculators, investors, etc and the 7% should drop a bit lower.

In a normal economy your going to have a certain % that are not performing that's normal. The figures arent as bad as they probably look. Debt forgivness needs to be taken off the media agenda as its quite clear over 90% of people are not in major trouble and the ones that are were high risk to start with.

steve9859

Rabidlamb wrote: »

I remember a Frontline programme last year where the figure for arrears was quoted at 2%, this problems seems to be accelerating rapidly.
As the live register hasn't gone up considerably it's must be explained by one of these factors:
(1) People have eaten through their savings.
(2) People have had a reduction in income.
(3) Interest rate hikes.
(4) People have just given up paying full whack & want a life.

Where will this figure end I wonder ?.

The reduction in savings is the most worrying. It is the one thing that cannot be reversed in a timescale of less than a decade, maybe more. I'd like to see central bank numbers regarding the savings ratio now, rather than from months ago. That means that when would otherwise be coming out of this, people will still not spend as they will focus on building up savings first. Hence no recovery in domestic consumption for the forseeable future, which of course will impact everyone (not just those with unaffordable mortgages).

So those against any kind of mortgage relief will suffer due to ongoing low growth and high tax rates, just as much, if not more, as they would by paying for some mortgage relief now.

Mr. Presentable

drunkmonkey wrote: »

Well the good news is 93% are not in arrears.

Dig into those figures and see how many are second home, speculators, investors, etc and the 7% should drop a bit lower.

In a normal economy your going to have a certain % that are not performing that's normal. The figures arent as bad as they probably look. Debt forgivness needs to be taken off the media agenda as its quite clear over 90% of people are not in major trouble and the ones that are were high risk to start with.

Good post. The media and their slavish followers have a definite "glass half empty" attitude, and without doubt no real desire to look past a blazing headline.

supermonkey

Rabidlamb wrote: »

There will have to be a 2 track approach taken by the banks.
Those who bought during boom & now in high NE cannot have interest rates exceed some given value, say 6%.
Those who buy now in deflated market, 10%+.

Why? If you cannot pay your mortgage you should lose your house.

7% is not anything to be concerned about.

Rabidlamb

drunkmonkey wrote: »

Well the good news is 93% are not in arrears.

Dig into those figures and see how many are second home, speculators, investors, etc and the 7% should drop a bit lower.

Hmmmmm... but how many of the 777,000 mortgages were taken out during the boom.
The true figure for PPR's bought between 2002 & 2008 that are in distress could be higher.

Anyway, I agree with you over debt forgiveness, it's a red herring even if little Jimmy can't feed his kids.

Taxi Drivers

Mr. Presentable wrote: »

Good post. The media and their slavish followers have a definite "glass half empty" attitude, and without doubt no real desire to look past a blazing headline.

There is a fairly balanced take on it also on the Independent.

Three percent of all households are in arrears

ei.sdraob

What about those buy to let mortgages whose growth the centralbank recorded and noted right true the bubble (but did nothing!)

centralbank wrote:

The outstanding amount of on-balance sheet loans for buy-to-let residential properties was €24.6 billion at end-March, accounting for 24.9 per cent of all loans for house purchase.

A quarter of mortgages are very speculative

What % of the arrears do they represent I wonder..

cavedave

Mr.Micro

The interest rates are still rock bottom compared to some years ago. In reality the rates should be 9 to 12%. I cannot believe that people thought that the rates are always going to be low when they took out mortgages.

By what economic theory should interest rates in an area with inflation of 2.5% and .2% gdp growth rate be double or triple current rates?

Taxi Drivers

ei.sdraob wrote: »

What about those buy to let mortgages whose growth the centralbank recorded and noted right true the bubble (but did nothing!)

A quarter of mortgages are very speculative

What % of the arrears do they represent I wonder..

Today's statistics only deal with owner-occupied mortgages.

Karl Whelan

“Are these stats supposed to exclude investor mortgages?”

Yes — owner-occupied only.

2. Residential Mortgage Loan Account:
Means an account which records loans to individuals for house or apartment purchase, renovation, improvement or own construction of housing fully or completely secured by a mortgage on the residential property which is or will be occupied by the borrower as his/her principal private residence.

ei.sdraob

Taxi Drivers wrote: »

Today's statistics only deal with owner-occupied mortgages.

Karl Whelan

“Are these stats supposed to exclude investor mortgages?”

Yes — owner-occupied only.

2. Residential Mortgage Loan Account:
Means an account which records loans to individuals for house or apartment purchase, renovation, improvement or own construction of housing fully or completely secured by a mortgage on the residential property which is or will be occupied by the borrower as his/her principal private residence.

Cheers, tho I wonder what's going on with they 25 billion buy-to-let ticking bomb over there

MagicSean

Not surprising. a friend of mine tried to negotiate her payments and was told that she would have to be 6 months in arrears before the would talk to her about lower payments.

Rabidlamb

I have to say if I found myself way in over my head I'd sit back & light a big fat one.
Pay the minimum (2/3rd's the interest), consider it cheap rent for 2 or 3 years.
If you're going to end up renting anyway you may as well make the most out of these few years while your number 46,382 on the list.

Scofflaw

While the CBI's quarterly figures are behind the times, things were certainly not too bad for households up to March this year:

Households’ net financial wealth, depicted in Chart 2, continued to increase during Q1 2011 rising to €105 billion or €22,903 per capita, over the period. This represented a 6 per cent increase on the previous quarter. Households’ net financial wealth has been on an upward trajectory since Q1 2009, rising by 80 per cent overall over the period. This trend is influenced by two factors: appreciating financial asset values, as insurance technical reserves and quoted shares have recovered some of the value lost during the financial turmoil; and declining liabilities, as households borrowed less and repaid their existing loans. Households’ liabilities fell to €193 billion or €42,170 per capita, during Q1 2011. This marked a decrease of €1.23 billion over the quarter. Overall, household liabilities have fallen by €19 billion, or 9 per cent, from their peak in Q4 2008.

http://www.centralbank.ie/polstats/stats/qfaccounts/Documents/2011q1_ie_qfaccounts.pdf

So I'm not sure that we're looking at people having eaten through their savings.

cordially,
Scofflaw

Mr.Micro

cavedave wrote: »

By what economic theory should interest rates in an area with inflation of 2.5% and .2% gdp growth rate be double or triple current rates?

Mortgage rates were often raised by the central bank of a country to curb an over heated economy or spending in the past, and thus were often much higher than the rate of inflation. Since we lost the power to set rates look at the results of overheating.

hmmm

Considering the massive increase in unemployment, and the reduction in salaries for most, 7% is not a bad outcome and is not unexpected. Also considering the almost leveling off of the unemployment rate, my expectation is that we will not see a massive increase on that figure - certainly not the 20% that some celebrity economists talk about.

I'm worried however that all this talk of debt forgiveness will see those who have been making efforts catch the Irish chancer disease and stop paying, hoping to have their debts written off. That debate has been very damaging, the sooner the government can shut up about it the better.

cavedave

Mr.Micro

The interest rates are still rock bottom compared to some years ago. In reality the rates should be 9 to 12%.

Mr.Micro

Since we lost the power to set rates look at the results of overheating.

You think the Irish economy is at the present time overheated?

lmimmfn

my worry is that this will become so large with the government robbing everyone left right and centre with taxes that we'll end up in a situation where the goverment and banks are liquid yet the people are impoverished long term.

Either that or worse still the government come up with some whacky plan to write off the debts of those who cant pay( dont get me wrong, fair for the guy with a family and struggling, not fair for some pr**k in his 2 million house )

thebman

lmimmfn wrote: »

my worry is that this will become so large with the government robbing everyone left right and centre with taxes that we'll end up in a situation where the goverment and banks are liquid yet the people are impoverished long term.

Either that or worse still the government come up with some whacky plan to write off the debts of those who cant pay( dont get me wrong, fair for the guy with a family and struggling, not fair for some pr**k in his 2 million house )

Most people (despite the media attention) aren't in a situation to get their debts wiped out so the government won't be going for the write off debts and sure you can keep your house option as it will lose them too many votes for one thing.

The reality is also that it can't possibly work. However, a more US style default system can work and there is no reason why it can't work and should not happen from what I can see. As was said on Vincent Browne tonight, one of the reasons we recapitalized the banks was so they could realise their losses and unpayable loans are a loss to the bank and in most cases the banks knows they are losses but is trying for as long as possible not to realise that loss.

The government need to reform bankruptcy law to allow court cases for loans to be reassessed to see if bankruptcy is the only option for the person. In such cases, the there should no reason why the bank should not seize the asset and write off the rest of the debt. The person can have a negative credit rating for 5 years or so and then get back on their feet.

Mr.Micro

cavedave wrote: »

You think the Irish economy is at the present time overheated?

No, but we would not be in this mess perhaps if interest rates had been high or proper fiscal management had been put in place. If the eurozone economy was growing fast then rates would climb and its only the fact that growth is so low that mortgage rates are too, the silver lining.