Many homeowners struggling with mortgage payments are finding that their loans have been taken over by vulture funds, which are charging some of the highest interest rates in the country.
New statistics from the Central Bank reveal a significant increase in the number of people who have recently missed mortgage repayments. In the first three months of this year, over 3,600 mortgage accounts went into early-stage arrears, compared to the same period last year.
This marks the third consecutive quarter with a rise in early-stage arrears on an annualized basis.
Mabs (Money Advice and Budgeting Services), a state-funded service for debt management, recently warned that unless radical solutions are implemented, thousands of families whose loans were sold to investment funds will end up in arrears once again.
When comparing the number of early-stage arrears in the first three months of this year with the last three months of last year, there was an additional 1,430 mortgage accounts classified as being in early-stage arrears.
However, the Central Bank cautioned that some of the arrears figures have been affected by what it refers to as a “reclassification effect.” This is due to loan sales that took place in the first three months of the year.
“This reclassification reflects differences in the treatment of accounts in arrears up to 30 days among the relevant institutions,” the Central Bank explained.
It appears that some of the loans this year were not considered to be in arrears by the banks that sold them. However, the purchasing banks categorize some of these loans as being in early arrears.
Ulster Bank and KBC Bank, which are leaving the market, sold loans to major Irish banks such as Permanent TSB, Bank of Ireland, and AIB.
In addition to the 3,600 new arrears cases in the past year, there were 2,000 additional cases reported between January and September. These statistics indicate that nearly 20,000 mortgage accounts are currently in arrears.
Although financial experts remain hopeful that these mortgage holders will not fall into long-term arrears, the figures indicate that there were 22,015 accounts in long-term arrears (over one year) in March, a decrease from the 26,016 reported in the same month last year.
The majority of all mortgage arrears cases are held by vulture funds and are managed by companies such as Pepper, Start Mortgages, and Mars.
As of the end of March, investment funds held only 16% of all residential mortgages. However, vulture funds account for 76% of all mortgage arrears cases that are over one year old, according to the Central Bank.
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