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ECB – Continued Interest Rate Hikes

The European Central Bank has increased interest rates for the eighth time since last summer with no indication that there won’t be further rises in the coming months. The 0.25 % rise will add €300 a year to the cost of repaying a €200,000 tracker mortgage. We have seen a historic increase in tracker rates which have jumped by 3.75 percentage points in less than a year.

This will more than likely lead to fixed rate rises for first-time buyers, and vulture funds are likely to push up rates for their variable rate customers again.

Latest reports show that there are around 170,000 tracker mortgage customers, who are directly affected every time there is an ECB rate hike. There are an additional 50,000 homeowners that will be coming out of fixed rates in the next three years.

It could be 2025 before rates start to come down but it is unlikely that the historically low interest rates from the last decade will ever return.

In addition to the sharp rise in interest rates, the cost-of-living increases and high energy costs, the inevitable knock-on effect is now starting to be seen in the Home Loan Arrears reports from the Central bank.

Home Loan Arrears

We had been seeing a steady decline in the number of loan accounts in arrears over the last number of years which occurred as a result of the last financial crash. One positive from last week’s Central bank report is that it shows that the number of accounts in long-term arrears, which is defined as greater than one year, was 22,015 in March 2023, this is a reduction of 4,000 from 26,016 in March last year.

This can be linked to the banks putting in place informal restructures with their customers and also the success of the Personal Insolvency legislation in allowing debtors restructure and write off unsustainable debts.

The New Central Bank arrears figures did show one major concerning statistic in that it shows a spike in those who have recently missed mortgage repayments.

They report that at the end of Q12023 there are almost 50,000 home loan accounts in arrears. Of this total almost 40% (20,000 accounts) are in arrears less than 90 days. This has increased significantly and steadily over the last 12 months.

Loan Sales and Bank closures

In the last number of months the departing banks Ulster Bank and KBC Bank have sold home loans to Permanent TSB, Bank of Ireland and AIB. There has also been some non-performing home loan sold to Vulture/Investment funds during this period.

The majority of all arrear’s cases are held by vulture funds, and serviced by the likes of Pepper, Start Mortgages and Mars.

At the end of March, the Central Bank figures show that these vulture funds held just 16pc of all residential mortgages in the state, but they account for 76pc of all mortgage arrears cases over one year.

What to do if you are concerned or are in arrears

The first point would be not to panic. The second would be not to expect that the bank in question will solve this problem for you.

There are significant protections in place for homeowners to seek advice when they run into trouble.

The first port of call should be to the local MABS office. Below is a link to their page, and I would recommend that you get in contact with them. They have a lot of experience and expertise in assisting those in financial distress and as a state body their advice is free of charge. They have a number of budgeting tools which are very useful if you are trying to manage the household finances. This is a link to their list of offices: MABS contact details

I would also recommend that you would get yourself up to speed on the protections that you are entitled to and that you understand that the bank must treat this matter seriously and in line with the Mortgage Arrears Resolution Process MARP. It is important to know your rights and to seek independent advice.

Should you require additional advice at that stage then it would be advisable to contact a Personal Insolvency Practitioner (PIP) who can independently assess the best options available to you at that time based on your specific unique financial circumstances. There are a number of resources available which I have included below:

• Back on Track – this sets out the various options available under Personal Insolvency and Bankruptcy

• PIP Register – this is a list of the Personal Insolvency Practitioners licenced in Ireland. This can be searched by location so you can see the closest office to you.

As stated above it is essential that if you are concerned at any time that you seek the independent advice that is available and highlighted in the resources noted above.

If you have any queries on the above, please contact me.

Regards

Mark Ryan

Partner – Quintas

Mark Ryan is authorised by the Insolvency Service of Ireland to carry on practice as a personal insolvency practitioner.