BY JOHN ELLIS, FINANCIAL ADVISOR
One of the headlines last week said more than 12,000 mortgage accounts had fallen into arrears for the first time. That is not quite what the Central Bank of Ireland published.
At the end of June there were 12,315 family-home mortgages in what the bank calls early arrears, behind by less than 90 days. That was down on the 13,694 recorded at the end of March. Longer arrears, over 90 days, stood at 21,081, or 3% of all accounts, the lowest share on record. Long-term arrears, over a year, are also at a low.
So, missed payments are not piling up. But there are 33,396 family-home accounts in some form of arrears. Early arrears of 12,315 means thousands of households are already a month or two behind.
Non-bank lenders hold a little more than 100,000 mortgages but account for about three-quarters of the accounts more than 90 days behind, and more than four-fifths of those behind for over a year. If your loan was sold on after the last crash, this is not an abstract point. You may never have chosen to deal with a fund, but you can still end up dealing with one.
The squeeze is coming from the cost of living, not from a binge of reckless lending. Energy bills are the obvious pressure. One in seven electricity customers were in arrears by July, about 323,500 homes, with an average unpaid balance around €509. More than one in four gas customers were behind.
And then there are the rates. Last week’s rise will not help the tracker end of the market. Variable and fixed deals are being repriced as I write. You can be working, on a decent wage, and still find the money does not stretch far enough. This is why early arrears matter. Miss one payment and it may just be a bad month. Miss three and you are into a different process.
Lenders must operate the Mortgage Arrears Resolution Process. In plain terms they must treat your case properly, put trained staff in place, and look at an arrangement before they go legal. They cannot start court proceedings for at least eight months from when the arrears began, or three months after an arrangement fails, whichever is later.
That protection is not a reason to wait or hide. The worst thing you can do is ignore the first letter. Call the lender. Ask for the arrears support unit, NOT the sales desk. If you are getting nowhere, MABS is still the free next stop (www.mabs.ie). The Insolvency Service’s Back on Track site (www.backontrack.ie) is there when a short arrangement is not enough.
Do the sums before you go in. What is the shortfall each month? Is it the oil, the car, the electricity, or the mortgage rate? Which bill is putting the home at risk?
Restructures still exist. At the end of March there were tens of thousands of family-home accounts already on an arrangement. It doesn’t mean you’re a failure. They are how people stay in their home while things are difficult. An interest-only period, a term extension or a temporary reduction can help, but only if it is written down, and only if you know what happens when it ends. Pushing the problem down the road is not the same as solving it.
This is not a re-run of 2008. Credit standards continue to be tight. The long-term arrears pile is smaller than it was. That is the good news in the Central Bank tables. After a week of higher rates and another round of energy increases, the next six months will tell us whether 12,315 was a falling number or the floor.
john@ellisfinancial.ie
086 8362633
