Irish mortgage arrears biting

I estimated that the retail value of residential property sales during the economic bubble (2003 – 2007) was in the region of €130 billion.  The vested interests speak of a 40% drop in value since 2007 and which would imply negative equity in the region of €52 billion, with those bearing 100% mortgages being really severely hit.

But the escalating scale of the issue does not reflect the full impact of negative equity.  Some consider this a reflection of the forbearance of lenders while others see it as banks not wanting to record bad debts because they would have to raise additional core capital to comply with liquidity requirements.

 

Status of mortgage market 
– September 2009

 

	€ Million	Share
Principal dwellings	78,615	71.6%
Buy-to-let residences	30,045	27.4%
Second homes	1,104	1.0%
	109,764
Adjusted for securitisation	147,983
Number of loan accounts	791,634

 

Mortgage arrears at 30 Sep 2009

	Number of accounts	Balance € Million	Arrears € Million
91 – 180 days	8,504	1,589.27	47.68
Over 180 days	17,767	3,238.39	306.73
Formal demand issued	4,565	957.53	57,82
Court proceedings issued to enforce debt/security on a mortgage	3,617	699.49	84.17
COURT PROCEEDINGS
Legal proceedings issued to enforce debt/ security during Q3 2009	491	118.44	9.95
Cases concluded during Q3 2009, of which:	218	39.22	4.29

 

28 properties were voluntarily surrendered and 10 were concluded by abandonment.  The mortgages in respect of 60 others were renegotiated and those in respect of 10 others were dealt with by new arrangements – struck out, settled, adjourned, dismissed or judgement entered in favour of the lender.

 

Residential loan volumes Q3 2009

There were 12,189 loans drawn down in the third quarter of 2009 - this represents 3.9% fewer loans than in the previous quarter, and 56.4% fewer than in Q3 2008.

The breakdown of these was:

	Share	Number	Value € M
First-time buyers	29.8%	3,633	764
Mover purchase	20.3%	2,472	611
Top-up	31.0%	3,783	283
Re-mortgage	13.2%	1,602	304
Buy-to-let	5.7%	699	183
TOTAL		12,189	2,145

 

The amount drawn down in Q3 2009, €2,145 million, compares to €3,539 million in Q3 2008 and €8,282 million in Q3 2007.

The temperature of the residential property sector is as arctic as the prevailing weather!