FLAC warns of danger to society from rise in serious mortgage arrears

27 May 2010

Legal rights group FLAC expressed grave concern today over fresh figures from the Financial Regulator that show mortgage arrears are continuing to rise steadily. The independent organisation, stressed that a comprehensive set of solutions to this crisis must be put in place as a matter of extreme urgency.

According to the new figures, there are now 32,321 mortgages in arrears of more than 90 days which is 4.1% of the total number of residential mortgages. This upward trend in residential arrears is accelerating, with a 13% rise for the first quarter of 2010, compared to a rise of 9% in the previous quarter. This is an increase of nearly 300 new arrears cases per week.

More worryingly, 2 out of every 3 of these are in arrears of more than 6 months. This ratio has remained stable since last year. Some 10,504 are in arrears between 3 and 6 months while 21,817 are in arrears of 6 months or more.

While there is a decrease in the number of legal actions in each quarter, nonetheless, more homes are repossessed by lenders than are sold. Over the past 9 months, this figure has risen from 243 properties in possession to 456 - a rise of 88%. Thus, more homes are being voluntarily surrendered or abandoned than are being repossessed by court order, which means no legal proceedings are necessary.

A combination of economic recession and the collapse in house prices has trapped many people in mortgage debt and negative equity. FLAC's approach to this situation has consistently been that most people find themselves in arrears through events outside their control such as unemployment, reduced working hours, business failures, ill-health or higher interest rates. FLAC is therefore extremely concerned that in his remarks to the Insurance Institute of Ireland yesterday around the moral hazard and cost of assisting those in serious mortgage arrears, the Financial Regulator suggested that these people engaged in excessive borrowing.

The focus of actions thus far has been on the survival of the financial system while ignoring the human consequences. The medium and long-term effects of allowing chronic over-indebtedness to slide on a 'wait-and-see' basis may be catastrophic, in terms of healthcare costs, social disorder and potential homelessness. Thus the taxpayer may ultimately face a bigger bill if this problem is not confronted in a constructive manner.

A measure of how worried the general public is about this issue may be seen in queries to FLAC's telephone information line and to our legal advice centres. About one in five calls on debt to the telephone information line are about mortgage arrears; about a quarter of people visiting our advice centres on a debt-related matter are seeking help on mortgage arrears.


Editors' notes:

  1. FLAC (Free Legal Advice Centres) is an independent human rights organisation dedicated to the realisation of equal access to justice for all. It campaigns through advocacy, strategic litigation and authoritative analysis to contribute to the eradication of social and economic exclusion.
  2. FLAC issued this press release in response to new statistics issued by the Financial Regulator on Residential Mortgage Arrears and Repossessions on 27 May 2010. The Financial Regulator's information can be accessed online.
  3. According to the Financial Regulator, residential mortgage arrears refers to "an account which records loans to individuals for house or apartment purchase, renovation, improvement or own construction of housing fully or completely secured by a mortgage on the residential property which is or will be occupied by the borrower as his/her principal private residence". In other words, family homes.
  4. Over the 9 month period from July 2009 to March 2010, there have been 84 houses repossessed on foot of an order, 218 have been voluntarily surrendered or abandoned, and 89 properties have been sold.
  5. More homes are repossessed by lenders than are sold. The figure was 243 at beginning of July 2009 and 331 at end of Sept and 397 at the end of December and now is 456 at the end of March.
  6. You can read more about FLAC's work on debt law reform.
  7. FLAC published its short-term proposals for action on debt in the latest issue of its newsletter.