Residential Mortgage Arrears and Repossessions Statistics: Q2 2016

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Summary

• The number of mortgage accounts for principal dwelling houses (PDH) in arrears fell further in the second quarter of 2016; this marks the twelfth consecutive quarter of decline. A total of 82,092 (11 per cent) of accounts were in arrears at end-Q2, a decline of 4.5 per cent relative to Q1 2016.
• The number of accounts in arrears over 90 days at end-June was 57,571 (8 per cent of total), reflecting a quarter-on-quarter decline of 3.6 per cent. This represents the eleventh consecutive decline in the number of PDH accounts in arrears over 90 days.
  All maturity categories of arrears, including over 720 days’ category, declined in Q2 2016.  This category recorded a fourth consecutive decline, having fallen for the first time in Q3 2015.
• 120,614 PDH mortgage accounts were classified as restructured at end-June. Of these restructured accounts, 88 per cent were deemed to be meeting the terms of their current restructure arrangement; the highest level since the series began. 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 2.5 per cent during the second quarter of 2016. At end-June there were 14,828 BTL accounts in arrears over 720 days, with an outstanding balance of €4.4 billion, equivalent to 18 per cent of the total outstanding balance on all BTL mortgage accounts.
• There was an increase of 1 per cent in the number of BTL accounts where a rent receiver was appointed, following a decline of 5 per cent in the previous quarter.
• Non- bank entities now hold 45,949 mortgage accounts for PDH and BTL combined. Of this number, almost 70 per cent are held by regulated retail credit firms, with the balance held by unregulated loan owners. 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-June 2016, there were 740,834 private residential mortgage accounts for principal dwellings held in the Republic of Ireland, to a value of €100.3 billion. Of this total stock, 82,092 accounts were in arrears; representing a fall of 3,897 or 4.5 per cent over the quarter. Some 57,571 accounts (8 per cent) were in arrears of more than 90 days.^[1]

The number of accounts in arrears over 90 days fell by 3.6 per cent over the quarter, marking the eleventh 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 €11.5 billion at end-June, equivalent to 11 per cent of the total outstanding balance on all PDH mortgage accounts.

Early arrears declined markedly during the second quarter of the year. There was a quarter-on-quarter fall of 6.7 per cent in the number of accounts in arrears of less than 90 days, which stood at 24,521 at end-June, representing 3 per cent of the total PDH stock. The number of accounts in arrears over 360 days fell to 44,877 at end-June, equivalent to 6 per cent of the total stock of PDH mortgage accounts and representing a fall of 1,613 accounts over the quarter. Accounts in arrears of between 361 days and 720 days saw the largest quarter-on-quarter decline, of 7.5 per cent.

The number of accounts in arrears over 720 days also declined by 812 accounts in Q2, or 2.3 per cent; this was the fourth consecutive decline in this category since the series began and follows a 1.5 per cent fall in the previous quarter. This represents a year-on-year decline of 8.1 per cent for accounts in arrears over 720 days. This contrasts significantly with Q4 2014 when the equivalent figure was an increase of 12.5 per cent. Accounts in arrears over 720 days now constitute 43 per cent of all accounts in arrears, and 87 per cent of arrears balances outstanding. For all institutions the value of accounts in longer-term arrears over 360 days remains large, amounting to €9.5 billion at end-June.

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 interest^[2]. 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 120,614 PDH mortgage accounts were categorised as restructured at end-June 2016. This reflects an increase of 168 accounts compared to end-March 2016. The share of interest only arrangements and reduced payment arrangements fell further during Q2, to 13 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 30 per cent and 22 per cent, respectively, at end-June. A breakdown of restructured mortgages by type is presented in Figure 2.

A total of 9,663 new restructure arrangements^[3] were agreed during the second quarter of 2016. The data on arrears and restructures indicate that of the total stock of 82,092 PDH accounts that were in arrears at end-June, 26,704 (33 per cent) were classified as restructured at that time. Of the total stock of 57,571 PDH accounts that were in arrears of more than 90 days, 24 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-June 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-June, 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 Targets^[4]. 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-June 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 second quarter of 2016, legal proceedings were issued to enforce the debt/security on a PDH mortgage in 1,243 cases. During Q2 2016, there were 769 cases where court proceedings concluded but arrears remained outstanding. In 372 cases the Courts granted an order for repossession or sale of the property. There were 1,783 properties in the banks’ possession at the beginning of the second quarter. A total of 397 properties were taken into possession by lenders during the quarter, of which 101 were repossessed on foot of a Court Order, while the remaining 296 were voluntarily surrendered or abandoned. During the quarter 494 properties were disposed of. The number of properties in possession at the end of the quarter are also impacted by reclassifications and the return of a small number of properties to the borrower. As a result, lenders were in possession of 1,683 PDH properties at end-June 2016.

Residential Mortgages on Buy-to-Let Properties

Arrears

At end-June 2016, there were 134,993 residential mortgage accounts for buy-to-let properties held in the Republic of Ireland, to a value of €25.2 billion. Some 27,042 (20 per cent) of these accounts were in arrears, compared to 27,891 accounts at end-March 2016; reflecting a decrease of 3 per cent over the quarter. Of the total BTL stock, 21,962 or 16 per cent were in arrears of more than 90 days, reflecting a decrease of 2.5 per cent over the quarter. The outstanding balance on all BTL mortgage accounts in arrears of more than 90 days was €6.1 billion at end-June, 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 20,269 at end-June 2016, reflecting a quarter-on-quarter fall of 2.8 per cent. BTL accounts in arrears more than 720 days declined by 0.6 per cent in Q2, marking seven consecutive quarterly declines. Accounts in arrears of over 720 days now number 14,828 or 11 per cent of the total stock of BTL mortgage accounts, and 86 per cent of outstanding arrears. The outstanding balance on these accounts was €4.4 billion at end-June, equivalent to 18 per cent of the total outstanding balance on all BTL mortgage accounts.

Restructuring Arrangements

A total stock of 26,930 BTL mortgage accounts were categorised as restructured at end-June 2016, reflecting a decrease of 292 accounts from the stock of restructured accounts reported at end-March 2016. Of the total stock of restructured accounts recorded at end-June, 76 per cent were not in arrears, while 86 per cent were meeting the terms of their restructure arrangement. A total of 2,457 new restructure arrangements were agreed during the second quarter of the year. 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 27,042 BTL accounts that were in arrears at end-June, 6,582 (24 per cent) were classified as restructured at that time.

Legal Proceedings and Repossessions

During the second quarter of 2016 rent receivers were appointed to 991 BTL properties, bringing the stock of accounts with rent receivers appointed to 5,741; this is up 1 per cent from end-March. There were 685 BTL properties in the banks’ possession at the beginning of Q2 2016. A total of 305 properties were taken into possession by lenders during the quarter, which represented the highest volume of repossessions in a quarter since the series began in 2012. Of the total BTL repossessions in the quarter, 171 were repossessed on foot of a Court Order, while the remaining 134 were voluntarily surrendered or abandoned. During Q2 2016 337 properties were disposed of. The number of properties in possession at the end of the quarter was also impacted by reclassification issues and the cessation of repossession proceedings affecting nine BTL accounts. As a result, lenders were in possession of 644 BTL properties at end-June 2016.

Residential Mortgages held by Non-Bank Entities

Arrears

At end-June 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-June 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 as of June 2016. For retail credit firm, 37 per cent of accounts are in arrears over 90 days, with 19 per cent in arrears of 720 days (Table 1). The equivalent figures for unregulated loan owners are 59 per cent and 38 per cent, respectively. Restructuring activity is higher among retail credit firms, with 23 per cent of loans restructured compared to 19 per cent for unregulated loan owners as of end-June.

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 71 per cent, with 60 per cent of all accounts in arrears over 720 days. For retail credit firms, 42 per cent of accounts are in arrears, with 26 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 below.

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^[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 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.

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: 

https://centralbank.ie/statistics/data-and-analysis/credit-and-banking-statistics/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;
• Mortgage Arrears - Frequently Asked Questions; and 
• Guide to Completing a Standard Financial Statement. 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