The number of Irish homeowners in arrears for more than 90 days inched lower to 7 percent in the third quarter from 7.1 percent three months earlier, according to latest figures from the Central Bank data showed on Thursday, confirming a pattern of moderating declines.

Arrears began falling sharply from a peak of 12.9 percent in 2013 in line with an economic recovery but the pace has slowed down since, dropping to 7.6 percent a year ago as lenders manage the most intractable non-performing loans (NPLs).

Here is an overview of the latest figures

  • The number of mortgage accounts for principal dwelling houses (PDH) in arrears fell further in the third quarter of 2017; this marks the seventeenth consecutive quarter of decline. A total of 72,489 accounts (10 per cent) were in arrears at end-September, a decline of 1.7 per cent relative to June 2017.
  • The number of PDH accounts in arrears over 90 days at end-September was 50,688 (7 per cent of total), reflecting a quarter-on-quarter decline of 2.1 per cent. This represents the sixteenth consecutive decline in the number of PDH accounts in arrears over 90 days.
  • All maturity categories of arrears, including the over 720 days’ category, declined in Q3 2017. This category recorded a ninth consecutive decline, having declined for the first time in Q3 2015. The decline of 1.7 per cent in Q3 2017 contributed to an annual decline of 8.5 per cent.
  • The number of PDH mortgage accounts that were classified as restructured at end-September was 119,070. Of these restructured accounts, 87 per cent were deemed to be meeting the terms of their current restructure arrangement, up slightly from the previous quarter. There was a continued reduction in short-term restructure arrangements such as Interest Only and Reduced Payments, which was partly offset by an increase in longer-term arrangements such as Arrears Capitilisations.
  • Buy-to-let (BTL) mortgage accounts in arrears over 90 days decreased by 3.9 per cent during the third quarter of 2017. At end-September there were 13,591 BTL accounts in arrears over 720 days, with an outstanding balance of €4 billion, equivalent to 18 per cent of the total outstanding balance on all BTL mortgage accounts.
  • Rent receivers were appointed to 390 BTL accounts during third quarter of 2017; this is down from 430 accounts in the previous quarter and continues the downward trend evidenced in recent quarters.
  • Non-bank entities now hold 48,868 mortgage accounts for PDH and BTL combined. Of this number, 63 per cent are held by regulated retail credit firms, with the remainder held by unregulated loan owners. Some 42 per cent of PDH accounts held by unregulated loan owners are in arrears of over 720 days, compared to 16 per cent of accounts held by retail credit firms.

Arrears

At end-September 2017, there were 731,119 private residential mortgage accounts for principal dwellings held in the Republic of Ireland, to a value of €98.6 billion. Of this total stock, 72,489 accounts were in arrears, representing a fall of 1,217 or 1.7 per cent over the quarter. Some 50,688 accounts (7 per cent) were in arrears of more than 90 days.

The number of accounts in arrears over 90 days fell by 2.1 per cent over the quarter, marking the sixteenth consecutive decline in this category. The outstanding balance on all lenders’ PDH mortgage accounts in arrears of more than 90 days was €10.2 billion at end-September, equivalent to 10 per cent of the total outstanding balance on all PDH mortgage accounts.

Accounts in arrears of up to 90 days decreased by 155 accounts, or 0.7 per cent, in the third quarter of 2017; this follows on from a decline of 1,366 accounts in the previous quarter. The number of accounts in arrears over 360 days fell to 39,160 at end-September, equivalent to 5 per cent of the total stock of PDH mortgage accounts and representing a fall of 879 accounts over the quarter. Accounts in arrears of between 361 days and 720 days saw a decline of 4.2 per cent over the quarter.

The number of accounts in arrears over 720 days also declined by 545 accounts in Q3, or 1.7 per cent; this was the ninth consecutive decline in this category and follows a 2.4 per cent fall in the previous quarter. This represents a year-on-year decline of 8.5 per cent for accounts in arrears over 720 days. Accounts in arrears over 720 days now constitute 44 per cent of all accounts in arrears, and 90 per cent of arrears balances outstanding. For all institutions, the value of accounts in longer-term arrears over 360 days remains large, amounting to just under €8.4 billion at end-September 2017.

Restructuring Arrangements

Forbearance techniques include: a switch to an interest only mortgage; a reduction in the payment amount; a temporary deferral of payment; extending the term of the mortgage; and capitalising arrears amounts and related interest. The figures also include advanced modification options such as split mortgages and trade-down mortgages, which have been introduced to provide more long-term solutions for customers in difficulty.

A total stock of 119,070 PDH mortgage accounts were categorised as restructured at end-September 2017. This reflects a reduction of 977 accounts compared to end-June 2017. The share of interest only arrangements and reduced payment arrangements fell further during Q3, to 9 per cent, indicating a continuing move out of short-term arrangements. In contrast, arrears capitalisation arrangements increased over the quarter and continued to account for the largest share of restructured accounts at 33 per cent at end-September. A breakdown of restructured mortgages by type is presented in Figure 2.

A total of 7,014 new restructure arrangements were agreed during the third quarter of 2017, the lowest figure recorded since end-September 2012. The data on arrears and restructures indicate that of the total stock of 72,489 PDH accounts that were in arrears at end-September, 25,058 (35 per cent) were classified as restructured at that time. Of the total stock of 50,688 PDH accounts that were in arrears of more than 90 days, 27 per cent were classified as restructured; unchanged over the quarter.

Some 79 per cent of restructured accounts were not in arrears at end-September 2017. Restructured accounts in arrears include accounts that were in arrears prior to restructuring where the arrears balance has not yet been eliminated, as well as accounts that are in arrears on the current restructuring arrangement.

At end-September, 87 per cent of restructured PDH accounts were deemed to be meeting the terms of their arrangement. This means that the borrower is, at a minimum, meeting the agreed monthly repayments according to the current restructure arrangement.

It is important to note that ‘meeting the terms of the arrangement’ is not a measure of sustainability, as not all restructure types represent longer-term sustainable solutions as defined within the Mortgage Arrears Resolution Targets[4]. For instance, short-term interest only restructures are, in general, not part of longer-term sustainable solutions. The MART sustainability targets also include a significant number of accounts in arrears which are part of a legal process. These accounts are not classified as restructured within the Mortgage Arrears Statistics. Arrears associated with such accounts are recorded in full in the data.

Inability to meet the terms of the arrangement implies that the restructure agreement put in place may not have been suitable. Table 1 shows the percentage of restructured accounts that were deemed to be meeting the terms of their arrangement at end-September 2017, broken down by arrangement type. Lower numbers indicate a greater number of borrowers are not currently meeting terms of new arrangement; this is particularly evident amongst cases in which a permanent interest rate reduction has been granted. As the figures in Table 1 only reflect compliance with the terms of the current restructure arrangement, we should expect to see a higher percentage of compliance among the restructure types that are likely to be shorter-term.[5] Accordingly, the figures show that of the total stock of accounts in the arrears capitalisation category, some 21 per cent of PDH accounts are not meeting terms of current restructure arrangement, i.e. the arrears balance has increased since the arrangement was put in place.

Legal Proceedings and Repossessions

During the third quarter of 2017, legal proceedings were issued to enforce the debt/security on a PDH mortgage on 1,072 accounts. During Q3 2017, there were 597 mortgage accounts where court proceedings concluded but arrears remained outstanding. In 403 accounts, the Courts granted an order for repossession or sale of the property. There were 1,739 properties in the banks’ possession at the beginning of the third quarter. A total of 396 properties were taken into possession by lenders during the quarter, up from 340 properties in the previous quarter. Of the properties taken into possession during the quarter, 137 were repossessed on foot of a Court Order, while the remaining 259 were voluntarily surrendered or abandoned. During the quarter, 420 properties were disposed of. The number of properties in possession at the end of the quarter is also impacted by reclassifications. As a result, lenders were in possession of 1,717 PDH properties at end-September 2017.

Residential Mortgages on Buy-to-Let Properties

Arrears

At end-September 2017, there were 124,702 residential mortgage accounts for buy-to-let properties held in the Republic of Ireland, to a value of €22.5 billion. Some 23,176 (19 per cent) of these accounts were in arrears, compared to 23,862 accounts at end-June 2017, reflecting a decrease of 2.9 per cent over the quarter. Of the total BTL stock, 18,864 or 15 per cent were in arrears of more than 90 days, reflecting a decrease of 3.9 per cent over the quarter. The outstanding balance on all BTL mortgage accounts in arrears of more than 90 days was €5.2 billion at end-September, equivalent to 23 per cent of the total outstanding balance.

The number of BTL accounts that were in arrears of more than 180 days was 17,451 at end-September 2017, reflecting a quarter-on-quarter fall of 4.1 per cent. BTL accounts in arrears greater than 720 days decreased by 3.5 per cent in the third quarter of 2017. Accounts in arrears of over 720 days now number 13,591 or 11 per cent of the total stock of BTL mortgage accounts. The outstanding balance on these accounts was €4 billion at end-September, equivalent to 18 per cent of the total outstanding balance on all BTL mortgage accounts.

Restructuring Arrangements

A total stock of 23,034 BTL mortgage accounts were categorised as restructured at end-September 2017, reflecting a decrease of 589 accounts over the quarter. Of the total stock of restructured accounts recorded at end-September, 79 per cent were not in arrears, while 87 per cent were meeting the terms of their current restructure arrangement. A total of 1,526 new restructure arrangements were agreed during the third quarter of the year, the lowest number of new restructures agreed in a quarter since this series began in 2012. On the BTL side, the largest cohort of restructured mortgages was in reduced payment (greater than interest only) arrangements, which represented 23 per cent of all restructure arrangements. The data on arrears and restructures indicate that of the total stock of 23,176 BTL accounts that were in arrears at end-September, 4,795 (or 21 per cent) were classified as restructured at that time.

Legal Proceedings and Repossessions

During the third quarter of 2017, rent receivers were appointed to 390 BTL accounts, bringing the stock of accounts with rent receivers appointed to 5,701; this is down from 5,879 accounts in the previous quarter. There were 635 BTL properties in the banks’ possession at the beginning of Q3 2017. A total of 320 properties were taken into possession by lenders during the quarter. Of the total BTL repossessions in the quarter, 77 were repossessed on foot of a Court Order, while the remaining 243 were voluntarily surrendered or abandoned. During Q3 2017, 198 properties were disposed of. The number of properties in possession at the end of the quarter is also impacted by reclassifications. As a result, lenders were in possession of 731 BTL properties at end-September 2017.