The annual reports of Bank of Ireland gives some insight into the changes in mortgage balances on their accounts. The 2012 interim report has tables that report the balance outstanding on mortgage accounts (both owner-occupier and buy-to-let) by year of origination at the end of 2011 and the end of 2012. See section on mortgages beginning on page 321. The figures in Table 2 from both years are reproduced here.
For example, using the first row of figures we can see that at the end of 2011, BOI had €123 million of outstanding mortgages which had originated before 1996. The Dec 2012 column shows that repayments during 2012 reduced the outstanding balance on these mortgages to €94 million. Thus €29 million or 23.6% was paid off the balances of these mortgages.
In 2012, the total amount of mortgage credit issued in Ireland by BOI fell by €369 million or 1.3%. However, if we account for the €981 million of mortgages that originated from 2012 this means that of €27,854 million of mortgage debt outstanding at December 2011, €1,350 million was repaid during 2012.
The reduction in the outstanding balance could be due to:
- repayments on the existing loan
- re-mortgages to a new loan or new provider
- write-downs on the existing loan
It is likely that the first of these is the main source of the balance reduction in BOI mortgages. This means that around 4.9% of the outstanding mortgage balance that BOI had at the end of 2011 was paid off during 2012.
On a simple straight-line basis this would mean that the stock of debt could be fully paid off in 20 years, however, over time the capital portion of repayments will increase as the interest due falls (due to capital repayments).
This would suggest that the average duration of BOI’s mortgage book given the current repayment pattern is around 15 years. This is pretty standard.
Of course, averages can be misleading. There will be some mortgages which will be repaid much quicker than that, many others which will require much longer and others which will likely never be repaid at all.
The report doesn’t provide the amount of arrears owing on the mortgage accounts. What we can see is that during 2012 around €1.3 billion of capital repayments were made on BOI mortgages. During the same period mortgages with a total balance of €0.9 billion fell in arrears of more than 90 days, bringing the total to €3.6 billion. The amount of missed payments (capital plus interest) is significantly smaller than the amount of capital payments made.
Séamus
ReplyDeleteThat is a really interesting table and paints such a different picture from the the general picture that "arrears are rising exponentially".
Arrears are rising and some people are in great difficulty. But the majority continue to pay capital off their mortgage, slowly but surely.
Take a borrower with 15 years left on their Standard Variable Rate mortgage - half of their monthly repayment is capital. A lot of these borrowers are in arrears, but their arrears may well be "arrears of capital". If they are paying a bit more than the interest, they are reducing their balance but they are in the arrears statistics.
"The report doesn’t provide the amount of arrears owing on the mortgage accounts. What we can see is that during 2012 around €1.3 billion of capital repayments were made on BOI mortgages. ...bringing the total [of arrears over 90 days] to €3.6 billion. The amount of missed payments (capital plus interest) is significantly smaller than the amount of capital payments made."
For the market as a whole, there were €1.7 billion of arrears on €17 billion of mortgages in arrears over 90 days at 31 December 2012. Bank of Ireland's loan book is in the best condition, after NIB. So if they have mortgages of €3.6 billion in arrears over 90 days, the arrears on these accounts are probably around €300 million. We don't know how much of this is interest and how much is capital. Let's say that the arrears of capital are €200 million.
This gives €1.5 million of capital repayments to €200 million of capital arrears. A ratio of 7:1