Troubled mortgage countdown: One in 10, one in 9, one in 8...

29 August 2011

Legal rights group FLAC today said it was "not surprised" by Central Bank figures showing that mortgage arrears were continuing to mount and declared that the arrears were only one symptom of a much larger personal debt problem. It called on the government to meet its responsibility to put in place a workable and comprehensive action plan on mortgage and personal debt that will allay the massive fear and uncertainty blighting the lives of so many people in Ireland today, especially in view of planned budget cuts.

"At the end of 2010, one in ten mortgages was in trouble. By March 2011, it was one in nine. Now we see almost one in every eight mortgages is struggling. How long is the government going to wait before taking decisive action?" asked FLAC Senior Policy Researcher Paul Joyce.

"Today's figures show 95,158 households in difficulty with their mortgages. It is likely that many of these also have other significant personal debt, but no such data is available. Unfortunately, mortgage arrears are only one of the few visible signs of a very large personal debt crisis. Any legislative solution must take all debts into account," continued Mr Joyce.

According to FLAC Director General Noeline Blackwell,"We in FLAC are not surprised and the people seeking legal information and advice from FLAC are under no illusion as to the enormity of the situation. The fact is that mortgage arrears have been mounting for three solid years and we have needed a coherent strategy from day one - but we have yet to see a serious attempt to tackle the issue."

Ms Blackwell said that while concerns about 'moral hazard' could not be ignored, the reality was that any properly instituted debt settlement scheme would not offer an easy way out for debtors and should not encourage people to default on their mortgages. "Far from it - debt settlement is a painful process that you would only take on if you have no other option, opening up all your financial closets and putting your finances in the hands of somebody else in a kind of personal IMF plan," she stated, adding that "most other developed economies have these schemes in place without significant 'moral hazard' problems, so why would Ireland be any different?"

Ms Blackwell pointed out that "current government policy seems to still want to leave all the decision-making and initiatives around debt resolution in the hands of the banks. When will we see a rebalancing of the issue? We in FLAC have people coming to us with multiple debt problems - if you are having trouble meeting your mortgage, you are probably finding it hard to pay your other bills and debts as well. We need a solution that is less bank-driven and more consumer-focused."

Ms Blackwell also predicted imminent budget-led problems: "In September the comprehensive spending review will make cuts which cannot avoid affecting many people at risk from debt. We need to bring out debt settlement measures at the same time as this review, not next year. There must be a plan now, not next January."

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 has also produced a Factsheet on the Code of Conduct on Mortgage Arrears and a checklist for action upon losing one's job.
  3. The Central Bank released its latest figures on mortgage arrears today, 29 August 2011.
  4. Some of the highlights of this release include:
  • At the end of 2010, one in ten mortgages was in trouble. By March 2011, it was one in nine. Now we see almost one in every eight mortgages is struggling - 12.24% of mortgages.
  • 95,158 mortgages are in arrears or are being rescheduled out of a total of residential mortgage loan accounts of 777,321.
  • Over 70% of mortgages in arrears are in arrears for more than six months.
  • The average amount of arrears for households in this category is over E21,000.
  • Despite the relatively low level of repossession cases, mortgage lenders now hold 809 repossessed properties, up from 692 in March 2011.
  • These figures refer only to mortgages on principal private residences, that is, where the mortgage holder is living in the property in question.