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Mortgage arrears could rise to 18 per cent, says report

Banks have still not recognised losses in full, says Davy Research, as it warns that mortgage arrears could rise from 13.5 per cent to as much as 18 per cent.

Ghost housing estate Lios na hAbhainn in Roosky, Co. Leitrim
Ghost housing estate Lios na hAbhainn in Roosky, Co. Leitrim
Image: Mark Stedman/Photocall Ireland.

MORTGAGE ARREARS AMONG owner occupiers could peak at 18 per cent, according to a new report from Davy Stockbrokers.

Arrears on buy-to-let mortgages are expected to be even worse, it said, with twice as many running at arrears compared to owner occupier rates.

According to the report, Irish banks need to start recognising losses. To date, it says there has been a lack of write downs and repossessions that would allow banks to do so. Eventual loan book losses are now likely to rise by 1bn-2.5bn more than last year’s bank stress forecasts predicted, a figure that the banks could probably absorb although other factors such as increased bankruptcy, further property price falls and macroeconomic developments posed risks to this forecast. Peak to trough, property prices are now down by 60 per cent.

“While the steep falls in employment of 8.1 per cent and 4.1 per cent in 2009 and 2010 are unlikely to be repeated, weak growth going forward will weigh on borrowers’ ability to service mortgage debt, and we see owner-occupier mortgage arrears peaking at 16.5 per cent” said David McNamara of Davy. “If employment growth disappoints, and long-term unemployment continues to rise, our adverse scenario forecast has arrears peaking at close to 18 per cent.”

In another report released earlier this week, the Crosscare Migrant Project said that many families are being forced to emigrate just to pay mortgages.

“Some people have to leave the country to support burdensome mortgages because the property crash now means that the family home is unsellable” said Joe O’Brien, Policy Officer with the Project. “The result is not that a family has to leave Ireland, but rather that a family is split with one parent emigrating to support a mortgage for a home that is unsellable.”

Falling again: property prices still at just half of peak value>

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