Belfast Telegraph

Rapid rise in mortgage arrears index

Irish house prices will fall further while mortgage arrears are rising rapidly, a rating agency warned yesterday.

The percentage of borrowers at least three months behind in their mortgage payments rose to 2.6% in the last quarter of 2009 from 2.36% in the previous quarter, according to Fitch Ratings analyst Rahul Mathur.

Fitch is currently reviewing all Irish residential mortgage-backed security transactions following the agency's forecasts for a 45% decline in house prices from their peak in late 2006. Prices have fallen 31.15% so far.

The average price of a house in Northern Ireland at the end |of last year was £161,429 — a fall of around 35% on the average price of £250,000 at the end of 2007.

Mr Mathur said: “The level of the Irish arrears index continues to increase rapidly. Though arrears and the repossession rate have increased over the |last year, the deterioration is |far below levels Fitch would expect given the stress in the Irish economy.”

The real level of arrears in Ireland is difficult to calculate because some lenders are converting mortgages into interest-only loans or coming to other arrangements to avoid admitting that the loans are overdue.

The courts are also proving reluctant to turn people out |of their homes for not paying mortgages.

Updated figures from the regulator are due out at the end of March. These are expected to show that the number of home loans in arrears of three months or more has shot up.

Fitch only examined mortgages financed by residential mortgage-backed security transactions, which have often helped finance loans to borrowers with a poor credit history.

In December, the rating agency downgraded some bonds backed by mortgage loans because of the “significant likelihood of high losses in the future on the high volume of loans currently in arrears”.

“Some residential mortgage-backed security transactions will come under “severe stress” because their performance deterioration doesn't yet reflect declines in house prices or the economy,” Mr Mathur added.

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