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The Central Bank said the increase in early arrears is 'driven primarily by the non-banks'. Shutterstock
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Increase in early mortgage arrears 'driven primarily by non-banks' and a ‘cause for concern’

Brokers Ireland said ‘we may be only beginning to see the impact of the ten European Central Bank interest hikes’.

THERE WAS A 3% rise in early mortgage arrears in the fourth quarter of last year, according to new figures from the Central Bank.

Early mortgage arrears are defined as accounts in arrears for less than 90 days, and this is the second quarter in a row that the figure has risen by 3%.

In the third quarter of 2023, this 3% rise equated to 482 mortgages, while the same percentage increase in the final quarter of last year is equal to 673 mortgages.

The Central Bank has said these increases are driven primarily by the non-bank financial institutions.

In December 2023, 40% of home mortgage accounts in arrears were held by banks, while 60% were held by non-banks entities.

Financial company Brokers Ireland has said the 3% quarterly increase in early mortgage arrears “clearly indicates the distress being caused to borrowers as a result of rapidly rising interest rates”.

Rachel McGovern, Director of Financial Services at Brokers Ireland, said the figures are a “cause for concern” and that “we may be only beginning to see the impact of the ten European Central Bank interest hikes that have taken place”.

In September, the ECB increased interest rates by 0.25%, the tenth consecutive increase.

For most of those with tracker mortgages, this increase pushed up mortgage repayments by €25 per month or more.

McGovern added: “The 3% in early arrears in Q4 2023 comes on top of a 3% rise in the previous quarter and is a clear indication of the financial stress being caused by the ten ECB interest rates hikes we’ve seen since July 2022 and the follow-on increases by Irish lenders, some of whom have not applied full follow-on increases.”

McGovern also noted that the Central Bank said early arrears are driven primarily by non-bank lenders.

“In some cases, their rates of interest are almost double those of the pillar banks,” McGovern said.

McGovern encouraged all borrowers struggling to make mortgage repayments to make contact with their lenders before the arrears happen, as the outcome is likely to be better.

“It’s a difficult issue to face up to but it’s better to be proactive,” said McGovern.

“Ideally they should look for professional help from a mortgage broker who has the expertise in dealing with lenders.”

Meanwhile, the number of accounts in long-term arrears – arrears of greater than a year – stood at 20,268.

This is a marked annual decrease of 11%, or 2,511 accounts, and is a quarterly decrease of 3%.

Elsewhere, the number of accounts in arrears for over 90 days stood at 29,024, a decrease of 3% on an annual basis.

The outstanding balance on home mortgage accounts in arrears of more than 90 days was just over €5.8 billion at the end of last year.

There were 707,045 home mortgage accounts in Ireland as of the end of last year, with a value of just over €100 billion.

Of these, 47,734 were in arrears as of the end of the last year, a quarterly increase of 0.86%.

The Central Bank attributes this to a decline in the number of accounts in longer term arrears, while the number of accounts in early arrears (up to 90 days) has increased.

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