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Irish sub-prime mortgage arrears are going through the roof

Loans from so-called sub-prime lenders are four times more likely to be in arrears than those from the mainstream banks

Auctioneers Windows Source: Sam Boal/Photocall Ireland

MORTGAGE ARREARS TO so-called sub-prime lenders in Ireland are increasing at a rate of knots.

19,935 mortgage loans issued by such lenders were in arrears of more than 90 days as at end December 2014, an increase of almost 2,000 since end September.

Similarly, the sub-prime sector now accounts for almost 20% of all residential loans in arrears of more than 90 days, up from 15.5% at end September.

The information was revealed in the Dáil by finance minister Michael Noonan in response to a question from Fianna Fáil’s Michael McGrath.

Legislation To Tackle Home Repossessions Michael McGrath Source: Mark Stedman/Photocall Ireland

McGrath claims that the rate of arrears for those who took out mortgages with sub-prime lenders stands at over 50%, meaning people with such a loan are four times more likely to be in arrears than if they took a loan with one of the mainstream banks.

“The first proposal I would make it to extend the Mortgage Arrears Resolution Targets to the (sub-prime) sector,” he said.

Currently the government’s plan for distressed mortgages applies only to the six main Irish banks.

While there has been some slowing of the arrears rate in the wider market, there has been no progress in dealing with the specific issues around sub-prime lenders with the level of arrears consistently above 50%.
In fact it is going in the wrong direction. Indications from the courts are that there has been a significant ramping up in the number of actions for repossession being taken with a large number of these from the sub-prime sector.
This issue is now reaching a crisis point and unless action is taken we will be facing a massive social problem

A recent RTE Prime Time documentary gave an indication of the perilous state of Ireland’s sub-prime sector.

Sub-prime loans in an Irish context are those granted by specialised lenders (the Home Funding Corporation Ltd. for example) to people who can not afford a house-deposit, who have a poor credit history, or who need a loan quickly.

Typically the loans are charged at a particularly high rate of interest, while the companies doing the lending tend to be extremely aggressive legally when it comes to reclaiming their loan from a client in arrears.

When it comes to the recent recession, sub-prime is a dirty phrase.

The sub-prime mortgage crisis in the US was one of the biggest contributors to the global credit crunch.

Huge swathes of loans to non-credit worthy homes and businesses led to banks the world over spiralling into crisis once those loans were inevitably defaulted on.

Read: Enda pledges action on mortgage crisis (and calls Fianna Fáil ‘arsonists’)

Read: ‘The banks weren’t showing compassion, they were waiting for an increase in property prices’

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