The Central Bank just released a bunch of mortgage arrears figures this morning. You can look at some of the raw numbers here Central Bank Mortgage arrears figures but I’ve been working on putting them in context for Drivetime this evening.
8.1% of mortgages are in arrears of more than 90 days. Let me put it another way the arrears problem is one and a half times bigger than it was a year ago. But this does not really represent how many people are in difficulty. If you include all the people who have restructured their mortgage payments by going interest only or agreeing entirely reduced payment schedules the figure stands at just under 13%.
Percentages are a bit abstract though when you consider that what that means is 99,346 households can’t pay for the roof over their heads. One in every seven mortgage holders has either fallen into arrears or has had to restructure their repayments. Fianna Fail made it all sound even worse this afternoon when they lumped in the figures for those experiencing some level of difficulty. There are 46,000 households that might have missed a payment or two. Their conclusion from that Is that the number of mortgages in some level of difficulty is approaching 150,000. That would represent close to 1 in every 5 of all residential mortgages.
The accelerating rate of arrears is what is really frightening though. The Central Bank started collecting this kind of data in the last quarter of 2010. At that time 5.7% of mortgages were in arrears of 90 days or more. It jumped to 6.3% by the end of the next quarter. By June of this year it was 7.2% and now 8.1% in these latest figures. In the space of a year the number of people in default has jumped by over a quarter.
Really worrying is the increase of the number of households for which there would appear to be little or no hope of crawling out from under their debts. There are 15,000 more households that are in arrears of 180 days or more than there was this time last year. You would have to doubt that they are in a position to ultimately avoid default. Over half of the mortgages that have been restructured are paying interest only, or less than the interest, or are paying nothing at all.
The financial distress being experienced is no doubt in the vast majority of cases genuine. It’s worth noting though that one bank recently said that it believed some weren’t keeping up mortgage payments in the belief that the government would end up introducing debt forgiveness of some kind.
My very crude extrapolation of where we will be next year based on where we were last year would suggest that the 90 days or more figure might jump from 8.1% up to 11.7%. Add in those that would have lengthened the term of their mortgage or gone interest only and you are approaching something like 1 in every 5 households.
If you can extract one positive it might be that with default being that commonplace there’ll be no stigma associated with it.