Monday, August 29, 2011

29/08/2011: Mortgages Arrears - 2Q 2011 data

The Central Bank of Ireland today published the latest data on mortgage arrears and repossessions for 2Q 2011. Per CBofI data (note, much of the analysis is my own):
  • At the end of June 2011 there were 777,321 private residential mortgage accounts held in the Republic of Ireland to a value of €115.089 billion.
  • 55,763 accounts (7.2% of total) were in arrears for more than 90 days, up from 49,609 accounts (6.3% of total) at the end of 1Q 2011. Accounts in arrears have balances of €10.838 billion as of 2Q 2011, up on €9.599 billion a quarter before. Thus percentage of outstanding amounts that represent mortgages in arrears of 90 days and over is now 9.42% against 1Q 2011 percentage of 8.28%.
  • Percentages of loans in arrears more than 90 days have risen from 5.1% in 3Q 2010 to 5.70% in 4Q 2010 to 6.30% in 1Q 2011 and to 7.20% in 2Q 2011. Hence, the increases here are accelerating as of last quarter.
  • Percentages of loans volumes in arrears 90 days or more have risen from 6.64% in 3Q 2010 to 7.39% in 4Q 2010 to 8.28% in 1Q 2011 and to 9.42% in 2Q 2011. Again, increases here also accelerated, with 4Q2010 on 3Q2010 rising by 0.75pp, 1Q 2011 on 4Q 2010 rising by 0.89pp and 2Q 2011 on 1Q2011 rising by 1.14pp.
  • 69,837 residential mortgage accounts were categorised as restructured at the end of 2Q 2011, up from 62,936 restructured accounts at the end of 1Q 2011.
  • Of the restructured mortgages total, 39,395 are not in arrears and are "performing as per the restructured arrangement"
  • 30,442 of restructured mortgages "have arrears of varying categories (arrears both less than and greater than 90 days)"
  • Therefore, 95,158 accounts are either in arrears greater than 90 days or have been restructured and are not in arrears as at the end of June 2011.
  • Arrangements whereby at least the interest only portion of the mortgage is being met account for over half of all restructure types (52%).
Now, let me run though the figures in more aggregate detail. Take together all loans that are in arrears 90 days or more, plus repossessions and loans that are restructured, but are not in arrears. Clearly, these loans represent some indication of mortgages either at risk or defaulted. Let's call these such.
  • In 2Q 2011 a total number of 95,967 mortgages were either at risk or defaulted, up on 86,963 mortgages in 1Q 2011.
  • Between 1Q 2011 and 2Q 2011, the number of mortgages at risk or defaulted has risen by 9,004, which is a faster rate of increase than in the period between 4Q 2010 and 1Q 2011 when the rise was 6,665 mortgages.
  • In 2Q 2011, the percentage of all mortgages that were at risk or defaulted was 12.35%, up on 11.11% in 1Q 2011 and 10.21% in 4Q 2010.
  • In 2Q 2011 a total volume of mortgages at risk or defaulted was €17.493 billion, up on €15.774 billion of mortgages in 1Q 2011 and on €14.525 billion in 4Q 2010. Also, note that the rate of these mortgages increases is accelerating as well.
  • In 2Q 2011, the percentage of all mortgages value that was at risk or defaulted was 15.20%, up on 13.60% in 1Q 2011 and 12.45% in 4Q 2010.
Let me sum the above up: in 2Q 2011, the value of mortgages that were either in arrears 90days and over or were restructured and not in arrears accounted for 15.2% of the entire mortgages pool in Ireland.

Here's the summary:

Note that in the above table, the rates of risk increases are outpacing the rate of households deleveraging almost 15 times to 1.

We sooooo obviously don't have a mortgages crisis on our hands, that it all looks rather sustainable, ...if you stick your head deep into the sand bank... kinda like this...

1 comment:

Sharif said...

I have an idea on what could be done quite quickly and without the “Moral Hazard” that everyone is so afraid of.

There seems to be c.750k Mortgages in the country of which c.400k of them are tracker mortgages. Some economists have calculated that in order to give up a tracker mortgage the bank would have to reduce the principal by between 30-50% depending on the margin and term left on the loan. These Mortgages are loss making for the bank and banking sector as a whole and I think that collectively could be used as a bargaining tool for the whole 750K mortgages.

What I would propose is that every residential mortgage be marked down ( preferably to market price, but the 110% of market price that Iceland have could work too, a token writedown for small mortgages ) , in exchange for this everyone should come off their tracker and all mortgagees should be offered a long term fixed rate mortgage at a rate comparable to those in France or Germany. This would allow the banks to change their large loss making books to smaller profitable books which could be sold off at a later point if necessary.

I would see the following immediate benefits:

1. Individuals would have the principal written down removing the negative equity issue and making people more mobile with a greater propensity to spend.

2. If everyone is then on Fixed Rates, No more would people be at the mercy of ECB and Bank own interest hikes.

3. With everyone on the new fixed rate, it would provide an opportunity for foreign lenders to enter the market and undercut this new fixed rate.

The state should also introduce a capital gains tax on any gains achieved from the written down mortgage ( This could have a sliding scale element, Sell it in 2 years pay 50% CGT, keep it for 20 years pay nothing )

The solutions that are being talked about now, writing down some peoples loans will only temporarily fix things as as soon as rates start to move higher, a new wave of people in difficulty will bubble to the surface…

The above would need to be done in conjunction with new Bankruptcy laws and non-recourse lending as even with the above a lot of people still won’t be able to keep their property and lifestyle.

There is probably a million holes in the above and the numbers need to be worked through, but I don’t think enough is being said about the Tracker Books in the Banks which are unprofitable and will discourage competition ( How could a bank ever compete for my business when I have a rate of .9 over ECB etc.. ) .