23/8/2012: Mortgages Arrears in Ireland - Q2 2012

At last we have the data for Q2 2012 mortgages arrears in Ireland, and these are ugly. That's right, folks - ugly.

Let's keep in mind: Irish average household size is at 2.73 persons per household as per Census 2011.

Top numbers:

• Total number of outstanding mortgages in the state stood at 761,533 in Q2 2012, down 0.34% q/q and down 2.03% y/y. In the previous quarter (Q1 2012) the rate of mortgages decline was 0.63% q/q and 2.34% y/y. This suggests a slowdown in mortgages repayments (deleveraging) in the economy, despite the Government claims to the economic stabilization (something that would be consistent with accelerating deleveraging).
• Outstanding balances of mortgages are at €111.99 billion in Q2 2012, a decline of 0.62% q/q and 2.69% y/y. Again, compared with Q1 2012, there is a slowdown in deleveraging (-0.70% q/q and -2.82% y/y in Q1 2012).
• Of all mortgages outstanding, 45,165 mortgages or 5.93% (totaling €7.53 billion or 6.73% of all balances) were in arrears less than 90 days. In Q1 2012 the number was 46,284. This is a mew category of reporting and Central Bank deserves credit for continuing to improve data disclosure to the public.
• Of all mortgages outstanding, 17,533 (2.3%) of mortgages were in arrears between 91 and 180 days, with mortgage balance of €3.13 billion (2.79%). Good news, there has been a deecrease q/q in these mortgages - down 3.52% (in Q1 2012 there was a rise of 2.06% in this category) in number of accounts and a drop of 5.73% (against a rise of 1.32% in Q1) in mortgages volumes. Year on year, this category of mortgages arrears is up 11.64 in Q2 2012 which marks a slowdown from 27.5% rise y/y in Q1.
• However, the decline in the 91-180 days category of mortgages in arrears (-640 mortgages q/q) is almost ten-fold smaller than the rise in the arreas 180-days and over category (up 6,261 q/q in Q2). In other words, the decline in mortgages in arrears 91-180 days is explained fully by the rise of mortgages in arrears over 180 days.
• Number of mortgages in arrears in excess of 180 days now stands at a massive 65,698, up 10.53% q/q in Q2 2012 (in Q1 2012 the same rate of increase was 11.89%) and up 64.1% y/y. These mortgages amount to €13.35 billion - which represents a 10.64% q/q increase and a 67.22% increase y/y.
• Using old methodology, total arrears over 90 days now amount to 83,251 mortgages (up 7.24% q/q and 49.3% y/y), with a balance of €16.48 billion (up 7.11% q/q and 52.1% y/y). 
• Thus, currently, 10.93% of all mortgages in Ireland are in arrears 90 days and more, and these amount to 14.72% of total mortgages balances. For comparison, in Q2 2011 these percentages were 7.17% and 9.42% respectively.
• Using newly available data on mortgages in arrears less than 90 days, total number of mortgages in arrears in Ireland is 128,416 (16.86% of all mortgages outstanding) and these amount to €24.01 billion (21.44% of all outstanding balances).
• Now, put the above number in perspective - that is around 350,576 people (actually more, since mortgages arrears are likely to impact younger and larger households over retired and smaller households) in this country who are missing payments on their mortgages.
• In Q2 2012 there were 84,941 restructured mortgages (up 6.56% q/q and 21.63% y/y). The rate of restructuring has declined from Q1 2011 when q/q there was a rise of 7.17% and y/y there was a rise of 26.66%.
• Of restructured mortgages, 47.35% were not in arrears. Percentage of restructured mortgages in arrears has fallen from 56.41% in Q2 2011 and from 48.50% in Q1 2012. Which, of course, means that more an more restructured mortgages are falling back into arrears, implying that the restructuring solutions do not work for at least 53% of mortgages to which they were applied.
• As of the end of Q2 2012, there were total of 169,598 mortgages (22.27% of all mortgages outstanding) that were at risk (in arrears, restructured and not in arrears, and subject to repossessions). This represents (using average household size) 463,003 persons.

Charts to illustrate above trends:

At this stage, there is no point of denying that all restructuring and other 'solutions' deployed by the banks and designed by the Government are not working. The mortgages crisis is raging on. When you look at the third chart above, even using old definition of mortgages at risk (>90 days arrears), the trend up is linear, implying a constant rise in mortgages risk. Even abstracting away from the possible effects of the new insolvencies legislation on mortgages defaults, the trend above suggests that by Q1 2013 we will be close to 150,000 mortgages at risk (using in arrears more than 90 days metric). This would push overall mortgages at risk to beyond 200,000. More than half a million Irish people will be living in households at risk of falling behind on their mortgages repayments. The question I would like to ask of our 'leaders' is "Then, what?"