Mortgage arrears in Ireland fall despite pandemic’s economic effects

Over the past year, the covid-19 pandemic has caused many economic challenges for Irish citizens and people worldwide. Between level 5 lockdowns, business closures, and soaring levels of unemployment, it would be logical to believe that people may be falling behind on payments, especially mortgages, which are most people’s largest and most important monthly payment. However, recent data shows that the number of mortgages in arrears actually¬† decreased during the first quarter of 2021, despite level 5 lockdowns and record high unemployment rates.

Recent data from the Central Bank shows that the number of family home loans in arrears decreased by 2,838 during the first three months of 2021. During this period, the Covid-adjusted unemployment rate hit its peak of 25.1 per cent in early January, as thousands of businesses were forced to close their doors due to level 5 lockdowns. This is surprising given that the number of people behind on their mortgage payments actually decreased, while conventional wisdom would expect to see an increase in arrears. This contrast suggests that government supports, such as pandemic unemployment benefits, have been effective in increasing economic stability and preventing a repeat of the problems experienced during the financial crisis, per the Central Bank’s Financial Stability review, published on 16 June 2021.

While short term arrears (those under 90 days) made up the vast majority of the decrease, long-term arrears declined slightly as well, despite the many economic challenges brought on by the coronavirus pandemic. The Central Bank found that 37,723 principal dwelling homes were in arrears as of March, representing just 5.2 per cent of the private residential mortgage accounts in Ireland. More than half of those accounts that are behind on payments are long standing arrears of more than one year, meaning that while the long term problem of arrears resolution is not being solved, but that fewer borrowers are currently falling behind on their mortgage payments. However, it’s interesting to note that one in ten of these arrears were behind by more than 10 years on payments, indicating that many of these accounts still have not resolved problems dating back to the financial crisis.

Of the outstanding mortgages in the quarter, repossessions were extremely rare. Just 21 personal properties were successfully repossessed during the quarter out of 42 repossession orders given out. 4,572 borrowers entered restructuring agreements during the quarter, representing some 10 per cent of outstanding mortgages. Fortunately, the vast majority of these borrowers were successfully making monthly payments, but about 1 in 5 were not abiding by the terms of their restructuring agreement.


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