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Dan White: Why cash-strapped homeowners must be next for a bailout

EVER since the Financial Regulator started publishing mortgage arrears statistics in December 2009, there has been scepticism about these official figures.

This is because the numbers did not include homeowners who had notified their lenders that they were experiencing difficulties with their mortgage repayments.

This week, the Regulator finally bowed to pressure and published more detailed statistics. The latest figures confirm the widely-held belief that the problem of mortgage arrears was much more serious than previously thought.

Rising

These show that 44,500 mortgages were more than 90 days in arrears at the end of December. Of these over 31,000 were more than 180 days in arrears.

These numbers have been steadily rising. The number of mortgages at least 90 days overdue stood at just 28,600 at the end of September 2009.

In other words, the number of homeowners whose mortgages are at least 90 days in arrears has increased by more than 50pc over the past 15 months. And that unfortunately is barely the half of it.

The Financial Regulator also reveals that no fewer than 59,000 homeowners had had their mortgages restructured by their banks.

Unfortunately, despite securing the agreement of the lenders to restructure their mortgages, 24,000 of these restructured mortgages were in arrears at the end of December. If, even after having their mortgages restructured, they are still in arrears the outlook for these homeowners is very, very bleak.

What this means is that when you exclude the double-counted restructured mortgages which are in arrears, over 79,000 mortgages are either in arrears and/or been restructured. That's over one in ten of all mortgages.

These troubled mortgages represent an even higher proportion of all mortgages by value. According to the Regulator's figures, the original value of the mortgages in arrears stood at €8.6bn, to which must be added a further €5.9bn of performing restructured loans. That's a total of €14.5bn or one eighth of the €116bn of mortgages outstanding at the end of last year.

What this means is that homeowners experiencing difficulties with their repayments have higher-than-average mortgages.

The likelihood is that the majority of those in trouble bought over-priced homes, which have since halved in value, at or close to the top of the market during the middle of the last decade.

It is vital that the incoming government takes steps to write down the loans of those homeowners who borrowed to purchase homes which have since fallen massively in value, a sort of NAMA for the little guy.

What is now clear is that the Irish banks are in serious denial about the true state of their mortgage loan books. A bit like commercial property lending three years ago we are being continually assured that, despite the evidence we can see in abundance with our own eyes, all is well and there is nothing to worry about.

This will inevitably be followed by the steady drip of bad news, of which this week's figures are merely the first episode.

Stand by for plenty more bad news on the mortgage front in the coming weeks and months.

Timebomb

Not alone is the ECB apparently determined to push up interest rates by as much as 1.5pc over the next year-and-a-half, there is the ticking timebomb represented by tracker mortgages, 55pc-60pc of all homeloans.

Even where homeowners are up-to-date on their repayments, the banks are losing an absolute fortune on tracker mortgages.

This is because trackers are capped at a margin over official ECB rates, usually 1pc or less, while the shaky Irish banks are now having to pay a multiple of official ECB rates to attract deposits. Expect the banks to try and start tearing up trackers sooner rather than later.

All of which means that many more homeowners are going to face the prospect of losing the roof over their heads. The long agony is only beginning.