Monday, August 29, 2011

Mortgage Arrears Data

The Financial Regulator has just released the June 2011 update of the Mortgage Arrears Statistics.  The headline figures will get plenty of attention.  Here are some related points.

The number of owner-occupied mortgages in Ireland is now 777,321 and the total balance outstanding on them is €115 billion.  This is down from 782,429 mortgages owing €116 billion in the March release. 

Additional data from the Irish Banking Federation show that around €350 million new mortgage lending was provided to first-time buyers and for top-ups in the March to June period.  Lending to mover-purchasers and for remortgages may mean new lending could be even higher.

The €870 million in the outstanding amount and the €350 million in new lending means that around €1.2 billion of capital repayments were made in the quarter.  The data may be about mortgage arrears but it also shows that substantial mortgage repayments are also being made.

The average balance on all mortgages in Ireland is €148,000.  The average balance of mortgages in arrears is €194,000.

The 55,763 mortgages in arrears have €947 million in arrears owing or nearly €17,000 per mortgage.  For the 40,000 mortgages more than 180 days in arrears the average is €21,500 per mortgage.  Twelve months previously there were 24,000 mortgages in this category with average arrears of €19,500.

There were 6,154 households who moved into mortgage arrears in the second quarter. In the same period around 5,500 households became mortgage free.


  1. Dear Seamus,

    In today's Irish Independent you made the following statement:
    "There are 777,000 mortgages in Ireland; 7.2pc of them are in mortgage arrears
    There are 1,700,000 households in Ireland; 3.3pc of them are in mortgage arrears."
    I'm no lecturer in economics but i have to say that putting the above perspective on the mortgage arrears problem has no logic whatsoever.
    Highlighting the percentage of mortgage in arrears in report to the total number of mortgages is fine but comparing this to the total number of households in the Republic is daft to say the least.
    I hope you will appreciate the criticism.

    Best regards

  2. Hi Rares,

    The criticism is much appreciated and welcomed. This debate needs more if it.

    I not sure why you think comparing the number of mortgages in arrears to the number of households is "daft". Surely it gives a sense of scale to the problem relative to the overall economy.

    I'll try to respond to the criticism if you explain why it is daft. I don't think it is, but you may have very sound reasons for thinking so that I have overlooked.

    If we were discussing car ownership which would be a more useful statistic: number of cars owned per driver or number of cars owned per household?

  3. @Seamus

    Re Capital repayment on Mortgages:
    There is lot of anecdotal evidence that retiring PS workers are using lump sums to clear mortgages. Nothing wrong with that.Except to say that the rate of pay down may not continue.

  4. Hi Joseph,

    Useful contribution as always. There could be a lot to what you say. I was expecting the repayment to come at something around €1 billion and was pleasantly surprised when it was about 25% greater.

    Retirement lump sums for public sector workers are large but not €1.25 billion a quarter!

    Is this another case of private debt becoming public debt??

  5. Seamus

    Yes, the figures are getting worse. If arrears are added to 'restructured but still paying' then we seem to over 5% of all households (Approx 95,000 / 1,700,000).
    Your idea of targeting those that simply cannot and will never pay (VB Prog) makes sense. I would broaden it somewhat.
    The term 'debt forgiveness' is not helping.
    Better the old historical term
    'surrender and regrant'.
    Householder must concede ownership and gets to live in the house.
    The State 'buys' the house from the banks at a very large discount, say 75%, with an upper limit to exclude high-value houses. All assets must be in the pot before above is implemented except reasonable business assets needed to sustain a living.
    There is no need of a seperate agency to manage these new 'council' houses.
    If the banks are allowed to come up with the write off policy, whose mortgages will be written off. The State has a duty to define the criteria.
    And force the banks to use their provisions down to the last euro.
    And ask Sylvie Linnane to act as the State rep on banks boards. And to bring his camán.

  6. Posted on IE but worth discussing here as well.

    Isn’t the real problem, from the perspective of the banks, the 9.4% of the book by value that is in arrears rather than the 7.2% of cases they are in arrears.

    Also does the level of arrears in the 180 days plus category make sense at 10.8% of the loan value? Or do we have a substantial chunk of the book that is several years in arrears?

  7. @ Dreaded_Estate

    From the bank's perspective it is the proportion of the loan book that counts. I think the most recent debate is more to do with the people in arrears rather than the effect on the banks. If the focus was on the banks it is the 9.4% figure that counts.

    The average balance on mortgages in arrears is more than 30% greater than the overall average.

    The average arrears for those in the 180+ category is €21,500. The average size of mortgages in this category is €199,500. Depending on the rate and duration the repayments could be anything from €700/month (35 years @ 2.5%) to €1300/month (20 years @ 5.0%).

    If we take €1,000/month as a midpoint then the people in this group are, on average, nearly two years in arrears. In my opinion the majority of these mortgages are unsustainable.

  8. Hi Seamus,

    Care to put some class of econometric curve on those average mortgage sizes to get some deciles?

  9. @ yoganmahew,

    I'd have to get out those Weibull and Pareto distributions that Morgan Kelly was using during the week!

    We'd need more than one datapoint though. It would be interesting to even see how close the median wsa to the mean. Working out deciles would require some heroic assumptions.

  10. Yeah. What would be interesting, though, would be to see from around 2000 how the components of PSC changed - ideally by deciles. Sort of an update and expansion of this:

    If we (by we I of course mean you - this is so far beyond my amateurism) could strip out the super indebted, we could both get a handle on the problem affecting the majority and on the likely losses - since the super-indebted are likely to account for the majority of the losses in cash terms.