Irish Mortgage Woes Worsen as 25% of Home Loans in Trouble

Ireland’s mortgage woes worsened in the third quarter as the economy struggled to recover from the worst recession in its modern history.

By value, about 25 percent of all residential loans including buy-to-let were at least three months in arrears or had been restructured, according to Bloomberg News calculations based on central bank figures released today. That’s up from 22.5 percent at the end of the second quarter.

Irish banks are under pressure from regulators to find solutions for loans that might never be repaid after receiving 64 billion euros ($83. 6 billion) of bailout funds since the collapse of the country’s real estate bubble four years ago. Allied Irish Banks Plc (ALBK), the nation’s largest mortgage lender, plans to quicken the pace of restructuring, including the write off of some debt, next year, executives said last month.

“Given the ongoing economic and financial backdrop, it is not surprising that the overall stock of mortgage arrears continues to grow,” Felix O’Regan, a spokesman for the Irish Banking Federation, said. “This is likely to continue that way for some months yet.”

Ireland was plunged into economic crisis after a real estate bubble popped in 2008. Unemployment has tripled to about 14.6 percent, as companies led by Dell Inc., Allied Irish Banks Plc and Royal Bank of Scotland Group Plc shed jobs.

Pay Cuts

Twinned with pay cuts, rising joblessness has left many homeowners struggling to pay loans. Some 21.5 percent of the country’s 111.2 billion-euro private-residential mortgage market was either in arrears or had loans modified at the end of September. About 36 percent of the 31.1 billion-euro buy-to-let market was in arrears or restructure.

By cases, the share of private home loans in arrears for more than 90 days rose to 11.3 percent at the end of the third quarter from 10.6 percent at the end of June. In the buy-to-let sector, 17.9 percent of loans were more than three months in arrears, up from 16.6 percent.

Still, the rate of arrears increase is beginning to ease, at least in some sectors. Among private homeowners, arrears growth slowed to 6.3 percent in the third quarter from 7.1 percent in the second quarter.

“The slowdown is encouraging,” said Stephen Lyons, an analyst at Dublin-based securities firm Davy. It “gives greater comfort regarding the scale of the arrears problem as we enter 2013 and a step-up in the resolution process.”

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