Irish Mortgages More Than Two Years in Arrears Rise

Irish residential mortgages more than two years in arrears rose in the second quarter, even as total cases of default declined, according to central bank data.

Owner-occupier loans more than 720 days late in repayments increased 5 percent in the quarter to 37,066, the Dublin-based bank said in a statement today. Cases more than 90 days in arrears fell to 11.8 percent of loans in the period from 12.2 percent, marking a third straight quarterly decline.

Ireland’s government and central bank have prioritized tackling the country’s unprecedented mortgage crisis after the country emerged from an international bailout last year. While the nation’s jobless rate tripled after a real-estate collapse in 2008 to a peak of 15.1 percent in 2012, it has since fallen to 11.5 percent amid a rebound in the economy and property market. The central bank predicts Irish gross domestic product will expand 2.5 percent this year.

“While lenders continue to make progress on restructuring troubled loans, further effort is required to address the late-stage arrears, with this group of customers still struggling despite the recent pickup in the Irish economy and labor market,” said Ciaran Callaghan, an analyst with Merrion Capital in Dublin.

Permanent Solutions

Banks are turning to more permanent solutions for loans in arrears, including term extensions, permanent interest-rate reductions and split mortgages, where some of the loan is hived off until a borrower’s circumstances improve.

The number of modified loans rose by 10 percent to 101,973 in the second quarter, with 81 percent of such loans currently meeting their new terms, according to the central bank. Lenders held 1,274 repossessed homes at the end of June.

“Repossessions remain negligible,” Emer Lang, an analyst at Dublin-based securities firm, Davy, said in a note, adding that legal changes last year to make it easier for banks to seize homes have “yet to produce wholesale repossessions.”

Buy-to-let loans to landlords more than 90 days in arrears rose to 22 percent of loans at the end of June from 21.5 percent three months earlier. Bank of Ireland Plc, the nation’s largest lender by assets, said last month its buy-to-let loans in default rose in the first half as more borrowers moved off interest-only mortgages to repay capital.

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