Mortgage arrears ‘to rise by 10%’
31 Aug 2010
MORTGAGE arrears are expected to have increased by 10% when new data is released this week.
Analysts said that in the last quarter those in arrears for more than 90 days could have risen to over 35,000 from 32,000 in March, which would put accounts in arrears at 4.5%, up from 4.1%.
The data is expected to be released by the Central Bank and the Financial Regulator this week.
Frank Conway, director of the Irish Mortgage Corporation, said the rise in mortgage arrears is not a surprise and lenders have only themselves to blame. "We only have to look at what mortgage providers are doing to exacerbate the problem by increasing the rate of interest on standard variable rates which are completely counter-intuitive," he said.
Mortgage providers have increased charges by a full 1% to 1.5% over the past 12 months, according to Mr Conway. "Mortgage holders have an upper limit on how much they can afford their repayments increasing and lenders are already pushing those limits to breaking point," he said. Chief executive of the Irish Brokers Association Ciaran Phelan said a 10% increase wouldn’t be surprising because in his view these arrears figures fail to reflect the extent of the total problem.
"Those customers whose mortgages have been restructured cannot afford the debt and of those who are currently paying interest only on their mortgage, most have no medium-long term plan as to how they will be able to afford making capital repayments when the interest only period lapses, in which case many of these people will then fall into arrears," he said. "Banks’ profiteering activity by raising rates is doing nothing to alleviate the... arrears problems and will serve to exacerbate it going forward."
Mr Conway also said Ireland must make available a consumer-friendly personal bankruptcy code for those in most difficulty. "At the moment, consumers with excessive debt have to contend with a full list of creditors all vying for payment...
"Mortgage holders in Ireland are uniquely vulnerable. There are no rate caps on variable rate loans which would offer some protection against rising mortgage costs. Those on standard variable rate mortgages are particularly exposed to the needs of the banks who are now using those same customers to bail them out."
Irish Examiner
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