Proper solution is needed to mortgage arrears crisis

Proper solution is needed to mortgage arrears crisis Proper solution is needed to mortgage arrears crisis

It certainly hasn’t been a good week for the country’s banks.

Firstly, it was revealed that Ireland is second only to Greece in terms of lending to SMEs. This might have been disputed by the two major banks – AIB and Bank of Ireland – but the Central Bank’s report is the one most people will put their faith in.

It is, indeed, a great worry that businesses are being seemingly held back from investing at a time when what the country really needs is investment and job creation.

As bad as that situation might be, it was another report from the Central Bank that was perhaps even more worrying though.

They revealed on Thursday that the number of mortgages in arrears has jumped from 10.2% to 10.9% in the months from April to June.


Having also revealed the number of mortgage accounts that are in arrears for less than 90 days, we now know that more than 128,000 mortgage holders are now behind on repayments.

Considering there are just 761,533 residential mortgages in Ireland, that is a hugely substantial amount and the fear is that the number will only grow more in the coming months.

It has been said all too often before but a proper solution is badly needed to the problem of mortgage arrears. The Personal Insolvency Bill, for all the press it received, has fallen woefully short.

Meanwhile, there is a genuine fear that the remainder not in arrears could be forced closer to the edge as the banks seek to return to at least a break-even point.

It is well documented that tracker mortgages are costing banks money and up until now variable mortgage holders have been largely footing the bill for that by paying significantly higher rates. Those rates, in many cases, haven’t even dropped when the ECB have dropped theirs. So, in effect, banks have been openly defying the ECB by refusing to pass rate cuts on to their customers. It was the ECB’s intention after all for the rate cuts to free up money for spending in the European economy – not to ease the burden on banks.


The situation is such that many banks have even raised their rates when they should, in theory, be dropping them.

There are fears that if the mortgage arrears problems persist then another bank bail out might be required.

Whether that happens or not remains to be seen. Most people would be in agreement though that a healthy property sector is needed to help a healthy economy.

That doesn’t mean we should return to the insane lending of the boom years. However, it is a fact that many people are being denied loans at present because it simply doesn’t make economic sense for the banks to give them out, rather than anything to do with the applicants’ personal circumstances.

Our banking sector at present is lacking some serious competition. We are facing into a future where banks lend less, charge more for holding your money and have less branches to deal with your request and queries.

They can only take more and give less for so long though. The longer the current practice persists more and more people are going to reach breaking point.

A proper solution to the problem is needed – and fast.

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