The mortgage debt crisis has spiralled out of control as a result of Government inaction, and a generation of Irish people are “locked into an endless battle of attrition with the banks”, a leading arrears advocacy group has claimed.

However, a group representing the banking industry dismissed suggestions that the crisis was worsening and welcomed what it described as the “slowing pace of increase” in arrears.

Escalating crises

“The Government, the Central Bank and the bankers have failed those struggling with mortgage debt, directly contributing to the escalating economic, social and personal crises sweeping the country,” said David Hall of the Irish Mortgage Holders’ Organisation.

“The failure to introduce medium- or long-term restructuring for borrowers, and the banks’ inaction to wake up and realise the size of this crisis, has frozen the economic recovery of the country.”

He suggested that a generation of Irish people had been left to battle the banks without State support and said the mortgage crisis had been compounded “by the unresolved unsecured debt arrears”.

He said that on average, each family in difficulty with their mortgage also had four other sources of debt. “In order for those in debt to return to contributing to the economy we need effective, swift, fair and certain resolution of the household debt crisis.”

He said that while the insolvency Bill would provide a formal framework for the resolution of debts, it was “fundamentally flawed” because it gave banks a veto over any deal. “The banks’ actions over the last five years would give rise to major concern as to their co-operation with the Insolvency Bill,” he warned.

Situation worsening

Mr Hall said the situation was worsening. “It must be internationally unprecedented for a Taoiseach, Tánaiste, the governor of the Central Bank and head of banking regulation all to state their dissatisfaction with how banks are dealing with mortgage-holders, while at the same time not acting to deliver real policy solutions and changes. This Government is now fully paralysed by the crisis.”

The Irish Banking Federation (IBF) took a very different view and said while the overall level of private residential mortgage arrears had increased, the pace of that increase was slowing. It also said the level of repossession in the Republic was “very low by international standards” and said its members were “focused on maximising the number of sustainable mortgages”.

“Given the ongoing economic and financial backdrop, it is not surprising that the overall stock of mortgage arrears continues to grow and is likely to continue that way for some months yet,” said IBF director of public affairs Felix O’Regan.

‘Sticking-plaster strategies’

Chief executive of the Irish Brokers’ Association Ciarán Phelan accused the banks of failing to get to grips with the issue. “Our banks are the new leaders in the development of sticking-plaster strategies.

“The current avoidance strategy is actually making the problem worse, which will ultimately result in greater rather than lesser levels of debt write-down for the banks, costing the taxpayer even more.”

Repayment arrears increases by 5,000

Analysis: The number of people who have fallen at least three months behind on their home mortgage repayments has increased by more than 5,000 in the last three months and now more than one in 10 homeowners are in serious financial difficulties, new figures have revealed.

Fresh data from the Central Bank shows that 86,146, or 11.3 per cent, of the 761,954 private residential mortgages in the State were in arrears of at least 90 days at the end of September.

Distressed

This compares to 81,035, or 10.6 per cent, of mortgages which were similarly distressed at the end of June.

The number of homeowners who have accrued arrears of fewer than 90 days also increased during the third quarter. There were 49,482 private residential mortgage accounts in arrears of less than three months at the end of September, a quarter-on-quarter increase of 4.9 per cent.

A total of 81,683 residential mortgage accounts were categorised as restructured at end-September 2012.

This takes the number of homeowners in some form of arrears or who have had to restructure their mortgages to lower monthly repayments close to 180,000.

Just fewer than 67,500 accounts were in arrears of more than 180 days at the end of September, while close to 20,000 people were over two years behind on their home loan repayments and are at significant risk of losing their homes.

The amount of mortgage debt in arrears of 90 days or more is now €16.8 billion or 15.1 per cent of the €111.2 billion owing on Irish residential mortgages.

The Central Bank also published details of the indebtedness attached to buy- to-let (BTL) properties for the first time. The figures show that 26,770 or 17.9 per cent of such accounts were in arrears of more than 90 days as at the end of September.

The outstanding balance on buy-to-let mortgage accounts in arrears of more than 90 days was €7.9 billion at in late September, the equivalent to 25.5 per cent of the total outstanding balance on all BTL mortgages.

The number of properties in the possession of banks fell to 944 by the beginning of the third quarter.

The Central Bank said legal proceedings were issued to enforce on debt or security on a mortgage in 466 cases during the third quarter of the year, up from 345 cases the previous quarter.

Court proceedings concluded in 119 cases during the period and in 79 of these cases the courts granted orders for possession or sale of the property.