Mortgage arrears crisis looms ‘when payment breaks end’

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Ireland is hurtling towards another major arrears crisis as a significant number of people availing of payment breaks will be in no position to restart paying their mortgages this autumn, leading financial services experts have warned.

Irish lenders struck agreements with the Central Bank and the Government to extend an initial three-month payment break to six months as the Covid-19 economic crisis unfolded.

That second round of payment breaks ends in September — meaning that home loan borrowers who fail to resume paying the full monthly repayments in October will enter into an arrears process with their lender.

Leading mortgage broker and debt adviser Michael Dowling estimates that about 30,000 households — around half of the 62,480 currently on home loan payment breaks — will fail to restart paying in October because they will not be back in work, or because their pay was cut during the crisis.

“My one sense is at least 30,000 households will drop into the arrears process,” said Mr Dowling. 

“People will go back to work and will be in a position to resume their payments, but there will be a significant number who will not be back at work for some time.”

Padraic Kissane, the financial adviser who represents consumers on the Irish Banking Culture Board, also said that “a significant number” of people will face difficulties in paying their mortgages in October.

Mr Kissane said new groups of people will need some sort of payment breaks if they lose their jobs in the coming months, and warned that few understood the scale of the potential economic crisis, if the health restrictions are not observed.

The number of people falling into arrears will be closely linked to whether there is a second wave of the pandemic as the economy opens up, he said.

Central Bank figures published last month showed that over 26,400 home loans were in long-term arrears, a legacy of the last financial crisis.

“We are back into that horrible cycle,” Mr Dowling said. “We do not want to go back to the days of whether a distressed borrower can have Sky Sports or not, and the whole moral hazard debate.

“We have to recognise that this will be long term, and imposing a rigid repayment on a borrower will not work. It is important not to go back to the old ways.”



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