Residential Mortgage Arrears and Repossession Statistics: Q3 2016

View information release with charts (PDF 722.57KB) and related data tables.

Summary:

• The number of mortgage accounts for principal dwelling houses (PDH) in arrears fell further in the third quarter of 2016; this marks the thirteenth consecutive quarter of decline. A total of 79,562 (11 per cent) of accounts were in arrears at end-Q3, a decline of 3.1 per cent relative to Q2 2016.
• The number of accounts in arrears over 90 days at end-September was 56,350 (8 per cent of total), reflecting a quarter-on-quarter decline of 2.1 per cent. This represents the twelfth consecutive decline in the number of PDH accounts in arrears over 90 days.
• The majority of maturity categories of arrears, including the over 720 days’ category, declined in Q3 2016. This category recorded a fifth consecutive decline, having declined for the first time in Q3 2015.
• The number of PDH mortgage accounts that were classified as restructured at end-September was 121,140. Of these restructured accounts, 88 per cent were deemed to be meeting the terms of their current restructure arrangement, down slightly from previous quarter. The largest increases in restructures were again recorded in the categories of arrears capitalisation and permanent split mortgages.
• Buy-to-let (BTL) mortgage accounts in arrears over 90 days decreased by 2.4 per cent during the third quarter of 2016. At end-September there were 14,518 BTL accounts in arrears over 720 days, with an outstanding balance of €4.3 billion, equivalent to 18 per cent of the total outstanding balance on all BTL mortgage accounts. There was an increase of 5.4 per cent in the number of BTL accounts where a rent receiver was appointed; this follows on from an increase of 1 per cent in the previous quarter. 
• Non-bank entities now hold 45,678 mortgage accounts for PDH and BTL combined. Of this number, almost 70 per cent are held by regulated retail credit firms, with the remainder held by unregulated loan owners. Some 38 per cent of PDH accounts held by unregulated loan owners are in arrears of over 720 days, compared to 19 per cent of accounts held by retail credit firms.

Residential Mortgages on Principal Dwelling Houses

Arrears

At end-September 2016, there were 738,506 private residential mortgage accounts for principal dwellings held in the Republic of Ireland, to a value of €99.9 billion. Of this total stock, 79,562 accounts were in arrears, representing a fall of 2,529 or 3.1 per cent over the quarter. Some 56,350 accounts (8 per cent) were in arrears of more than 90 days.^[1]
The number of accounts in arrears over 90 days fell by 2.1 per cent over the quarter, marking the twelfth consecutive decline in arrears over 90 days. The outstanding balance on all lenders’ PDH mortgage accounts in arrears of more than 90 days was over €11.3 billion at end-September, equivalent to 11 per cent of the total outstanding balance on all PDH mortgage accounts.

Early arrears declined markedly during the third quarter of the year. There was a quarter-on-quarter fall of 5.3 per cent in the number of accounts in arrears of less than 90 days, which stood at 23,212 at end-September, representing 3 per cent of the total PDH stock. The number of accounts in arrears over 360 days fell to 43,643 at end-September, equivalent to 6 per cent of the total stock of PDH mortgage accounts and representing a fall of 1,233 accounts over the quarter. Accounts in arrears of between 361 days and 720 days saw a decline of 8.1 per cent.

The number of accounts in arrears over 720 days also declined by 429 accounts in Q3, or 1.2 per cent; this was the fifth consecutive decline in this category and follows a 2.3 per cent fall in the previous quarter. This represents a year-on-year decline of 7.4 per cent for accounts in arrears over 720 days. This contrasts significantly with Q3 2014 when the equivalent figure was an increase of 17.7 per cent. Accounts in arrears over 720 days now constitute 43 per cent of all accounts in arrears, and 88 per cent of arrears balances outstanding. For all institutions the value of accounts in longer-term arrears over 360 days remains large, amounting to €9.3 billion at end-September 2016.

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 interest¹. 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 121,140 PDH mortgage accounts were categorised as restructured at end-September 2016, the highest number since this series began in 2010. This reflects an increase of 528 accounts compared to end-June 2016. The share of interest only arrangements and reduced payment arrangements fell further during Q3, to 12 per cent, indicating a continuing move out of short-term arrangements. Arrears capitalisations and permanent split mortgages showed the most significant increases and continued to account for the largest shares of restructured accounts at 31 per cent and 22 per cent, respectively, at end-September. A breakdown of restructured mortgages by type is presented in Figure 2.

A total of 8,474 new restructure arrangements³ were agreed during the third quarter of 2016. The data on arrears and restructures indicate that of the total stock of 79,562 PDH accounts that were in arrears at end-September, 26,531 (33 per cent) were classified as restructured at that time. Of the total stock of 56,350 PDH accounts that were in arrears of more than 90 days, 26 per cent were classified as restructured, largely unchanged from the previous quarter.

Some 78 per cent of restructured accounts were not in arrears at end-September 2016. 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, 88 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 Targets⁴. 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 2016, broken down by arrangement type. Lower numbers indicate a higher incidence of ‘re-default’, which 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 Nonetheless, the figures imply that of the total stock of accounts in the arrears capitalisation category, close to 22 per cent of PDH accounts have ‘re-defaulted’, i.e. the arrears balance has increased since the arrangement was put in place.

Legal Proceedings and Repossessions

 During the third quarter of 2016, legal proceedings were issued to enforce the debt/security on a PDH mortgage in 1,210 cases. During Q3 2016, there were 481 cases where court proceedings concluded but arrears remained outstanding. In 300 cases the Courts granted an order for repossession or sale of the property. There were 1,678 properties in the banks’ possession at the beginning of the third quarter. A total of 421 properties were taken into possession by lenders during the quarter, of which 141 were repossessed on foot of a Court Order, while the remaining 280 were voluntarily surrendered or abandoned. During the quarter 400 properties were disposed of. The number of properties in possession at the end of the quarter are also impacted by reclassifications. As a result, lenders were in possession of 1,698 PDH properties at end-September 2016.

Residential Mortgages on Buy-to-Let Properties

Arrears

At end-September 2016, there were 132,571 residential mortgage accounts for buy-to-let properties held in the Republic of Ireland, to a value of €24.6 billion. Some 26,041 (20 per cent) of these accounts were in arrears, compared to 27,043 accounts at end-June 2016, reflecting a decrease of 3.7 per cent over the quarter. Of the total BTL stock, 21,435 or 16 per cent were in arrears of more than 90 days, reflecting a decrease of 2.4 per cent over the quarter. The outstanding balance on all BTL mortgage accounts in arrears of more than 90 days was €5.9 billion at end-September, equivalent to 24 per cent of the total outstanding balance.

The number of BTL accounts that were in arrears of more than 180 days was 19,756 at end-September 2016, reflecting a quarter-on-quarter fall of 2.5 per cent. BTL accounts in arrears more than 720 days declined by 2.1 per cent in Q3, marking eight consecutive quarterly declines. Accounts in arrears of over 720 days now number 14,518 or 11 per cent of the total stock of BTL mortgage accounts, and 87 per cent of outstanding arrears. The outstanding balance on these accounts was €4.3 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 26,151 BTL mortgage accounts were categorised as restructured at end-September 2016, reflecting a decrease of 779 accounts from the stock of restructured accounts reported at end-June 2016. Of the total stock of restructured accounts recorded at end-September, 77 per cent were not in arrears, while 86 per cent were meeting the terms of their current restructure arrangement. A total of 1,870 new restructure arrangements were agreed during the third quarter of the year; this is the lowest volume of new restructures arrangements agreed in a quarter since 2012. On the BTL side, the largest cohort of restructured mortgages was in reduced payment (greater than interest only) arrangements. The data on arrears and restructures indicate that of the total stock of 26,041 BTL accounts that were in arrears at end-September, 6,132 (or 24 per cent) were classified as restructured at that time.

Legal Proceedings and Repossessions

 During the third quarter of 2016 rent receivers were appointed to 606 BTL properties, bringing the stock of accounts with rent receivers appointed to 6,051; this is an increase of 5 per cent from end-June. There were 640 BTL properties in the banks’ possession at the beginning of Q3 2016. A total of 288 properties were taken into possession by lenders during the quarter. Of the total BTL repossessions in the quarter, 148 were repossessed on foot of a Court Order, while the remaining 140 were voluntarily surrendered or abandoned. During Q3 2016 298 properties were disposed of. As a result, lenders were in possession of 631 BTL properties at end-September 2016.

Residential Mortgages held by Non-Bank Entities⁶

Arrears

At end-September 2016 non-bank entities accounted for 5 per cent of the total stock of PDH mortgage accounts outstanding. For Buy-to-Lets the proportion was higher at just under 7 per cent. Overall, non-bank entities accounted for more than 5 per cent of the total stock of residential mortgage accounts outstanding (PDH and BTL) at end-September 2016 (7 per cent in value terms).

In terms of PDH mortgages held by non-bank entities, over 70 per cent are held by regulated retail credit firms at end-September 2016. For retail credit firm, 29 per cent of accounts are in arrears over 90 days, with 19 per cent in arrears of 720 days (Table 4). The equivalent figures for unregulated loan owners are 50 per cent and 38 per cent, respectively. Restructuring activity is higher among retail credit firms, with 24 per cent of loans restructured at end-September, compared to 21 per cent for unregulated loan owners.

Relatively similar numbers of BTL accounts are held by retail credit firms and unregulated loan owners. The number of BTL accounts in arrears for unregulated loan owners is particularly high at 70 per cent, with 59 per cent of all accounts in arrears over 720 days. For retail credit firms, 43 per cent of accounts are in arrears, with 25 per cent of accounts in arrears of 720 days.

A breakdown of PDH and BTL mortgages held by regulated and unregulated non-bank entities are presented in Table 4 and Table 5.

Annex 1: Mortgage Arrears Data and Further Information

The mortgage arrears data, along with a set of explanatory notes, are available in the Mortgage Arrears section of the Statistics portal of the Central Bank of Ireland website: Mortgage Arrears.

The Central Bank of Ireland has produced a number of consumer guides to assist consumers who are in arrears or facing arrears, including

• Mortgage Arrears - A Consumer Guide to Dealing with your Lender. (PDF 611.34KB)

• Guide to Completing a Standard Financial Statement (PDF 1.03MB).

The above guides, that include information on the protections that are available to consumers in financial difficulty, are available to download from the consumer information section of the Central Bank website.
________________________________________
¹ The figures published here represent the total stock of mortgage accounts in arrears of more than 90 days, as reported to the Central Bank of Ireland by mortgage lenders. They include mortgages that have been restructured and are still in arrears of more than 90 days, as well as mortgages in arrears of more than 90 days that have not been restructured.

² Arrears capitalisation is an arrangement whereby some or all of the outstanding arrears are added to the remaining principal balance, to be repaid over the life of the mortgage.

³ This includes first-time restructures and further modifications of existing restructures.

⁴ Sustainable solutions are defined on Page 25 of the Mortgage Arrears Resolution Targets (PDF 1.2MB) (Approach to mortgage arrears resolution) document.

⁵ It should also be noted that some categories reflect only a small number of arrangements, particularly in the case of BTL accounts.

⁶ Non-bank entities comprise regulated retail credit firms and unregulated loan owners. Unregulated loans owners include owners of mortgages not regulated by the Central Bank of Ireland, that have purchased mortgage loans secured on Irish residential properties. The Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 was enacted to ensure that relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale.