MORE AND more mortgage holders are falling into arrears on repayments, while borrowers are repaying mortgages at the lowest rate in a decade, according to credit ratings agency Moody’s.
The agency said mortgages falling into arrears of 90 days or more are likely to deteriorate further in the coming months as Ireland is “falling into a recession with no signs of early recovery”.
In a report on residential mortgages sold on to investors in securitisation deals, Moody’s said that mortgage arrears reached 1.7 per cent of loans in the first three months of this year, up from 1 per cent on a year earlier. The redemption rate for mortgage repayments fell from 13.4 per cent to 5.8 per cent this year, “the lowest level observed this decade in Ireland”.
“The decline in the total redemption rate is indicative of the tight credit conditions and weak economic expectations,” said Moody’s analyst Georgij Ludmirskij.
Moody’s said only one property had been repossessed in an Irish prime mortgage transaction in the first three months of the year.
The agency said average loans which were in arrears of more than 360 days remained low at 0.3 per cent of the loans, although this was up from 0.1 per cent a year earlier. “Further deterioration should be expected as a result of rising unemployment and house price depreciation,” said Mr Ludmirskij.
Moody’s said although strong growth in house prices had left borrowers with “equity cushions” on mortgages dating back several years, the pace and impact of the slowdown “have been exceeding forecasts during the course of the past year”. As a result, the “available equity cushions are shrinking, while the risk of borrowers becoming unemployed increases”.
