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IRISH BANKS HAVE struck just 742 permanent deals with home owners in long term arrears in five months.
Data released this morning from the Department of Finance shows that there were 14,727 loans in long-term arrears with a permanent restructuring deal in place at the end of May, compared to 13,985 at the end of 2013.
This implies a rate of just over 148 permanent solutions agreed per month, or just under 1,781 per year.
At the current rate, it would take over 33 years to tackle the remaining mass of mortgages either in temporary restructuring, or without any repayment plan in place at all.
There are a total of 58,992 mortgages in these categories, with the vast majority (53,252) having no deal of any form in place.
Arrears capitalisation
The most popular solution deployed for homeowners in difficulty is an ‘arrears capitalisation’, when some of the arrears are added to the total amount owed to be repaid over the entire term of the mortgage.
Over 20,000 of the permanent deals are included in this category.
However, the most recent statistics from the central bank shows that arrears recapitalisations are one of the least-effective ways of dealing with problem mortgages.
Only 63.8% of loans restructured in this way were classed as meeting the terms of the arrangement at the end of March this year.
Arrears capitalisation was criticised by members of the Oireachtas finance committee earlier this week as a method of dealing with problem loans.
Speaking to TheJournal.ie, Karl Deeter of Irish Mortgage Brokers said that the solution did little for the problem of mortgages in arrears.
It says that we are willing, as always, to massage statistics to make ourselves look better. It doesn’t mean that the person who needs it is any better off.
Meanwhile, the split mortgage is growing in popularity, with more than double the amount deployed in the market at the end of last year now in place as permanent solutions.
Buy to lets
The picture for buy-to-let loans is not much better, with only 341 fewer accounts in arrears than at the start of the year.
Out of a total of 26,647 accounts in arrears, a total of 20,383 are not restructured, with 1,851 in temporary restructuring and 4,413 permanently restructured.
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Interest rates have reached a level that makes borrowing to grow employment giving investment impossible.
@thomas molloy: Interest rates have been much higher in the past. At one point in the 90s, rates were in the mid-teens.
The low interest rates we have experienced over the past decade or so are an anomaly, in historical terms.
They will claim that they have achieved their objective in that inflation has reduced. They cannot see that their hiking of rates contributed to the inflation rate rise.
@Pato: ehhhhhhhh no.
@Pato: Explain.because everyone else will disagree with you.
@Pato: Please do explain
@Donal McCarthy: I think Pato is largely correct.
Inflation can be caused by two things:
1) A shortage of some goods, or service
2) A surfeit of money in an economy
As I understand it, the inflation we experienced – and are still experiencing – was due to (a contrived) shortage. A shortage in energy, driving up fuel and electricity prices, which then fed into everything else. This was preceded by another shortage caused by the Corona virus pandemic shutting down lots of manufacturing, particularly in China – the so-called supply chain shortages.
The way to address inflation caused by too much money in the economy is to remove some of that money. Increasing interest rates is one way to do that.
However, increasing interest rates will not bring down the cost of electricity.
Or petrol.
When the (major) cause of our inflation is the profiteering of energy companies, increasing interest rates just puts more cost onto all of us, including businesses. Which can only recoup those additional costs by increasing their prices.
Which adds to inflation.
The best way to address such profiteering by the oil (and gas, and associated energy) companies would have been a windfall tax.
@ItWasLikeThatWhenIGotHere: pato stated that the interest rate rises caused the inflation which was incorrect. yes energy prices and supply chain issues were minor contributory factors, but the primary factor was 10 years of free money, which was then acclerated into turbo over drive during covid when physical money supply in the US and EU increased by near 50%. There were 50% more dollars/euros in peoples back accounts after covid then before covid. I do not believe we will see near zero interest rates for some time. I believe it will remain between 2-3% for the very reason that this new money had to be extracted out of the economy and it needs to stay there otherwise it will result in another cycle of inflation.
@Niall English: No, Pato did not say that.
Pato said that raising interest rates “contributed to the inflation rate rise.”
Which is correct, in my view.
Bitcoin fixes Central Bank Ponzi Schemes
@Snacktoshi Nachomoto: how?
@Snacktoshi Nachomoto: anyone who buys crypto currency is a fool and typically didn’t study business subjects in school. The government and central banks decide what Currency we use whether that may involve digital euro. Profiting from digital euro is foolish.
@Snacktoshi Nachomoto: I’m afraid you are not as well informed as you may think. Bitcoin is the real ponzi scheme.
@Snacktoshi Nachomoto: bitcoin is the currency of crooks
@Liam Clifden: but maybe the worst performing in 2022, so what’s your point??
@Liam Clifden: Actually that’s a lie, xrp has preformed better than bitcoin and that’s with a court case hanging over it head, xrp is up over 50 percent from its bottom this year, bitcoin isn’t up over 50 percent from its bottom this year,
@Liam Clifden: bitcoin has zero intrinsic value. people like yourself are pursuant to the greater f00l theory. in order to profit, you need to find a bigger f00l to buy it at a higher price.
Control the money control the people
Great news. And well done central bankers. A solid victory over the ever populist economists.
@Itwaslikethatwhenigothere:
I don’t think you’re correct in relation to a windfall tax. Windfall taxes do nothing to protect against profiteering, they simply allow the state to increase their tax take.
Consider this. Company A usually makes profits of €100m and pays 12.5% tax on this. So they net 87.5m
Now they increase their prices and their income doubles to €200m – the government introduce a windfall tax of 20% on profits in excess of 100m so they now net 87.5m on the first 100m and 80m on the second 100m – net profits have increased to 167.5m – why would that entice them to reduce prices?
Even if the windfall tax was 50% – there is still no incentive to reduce as 50% of something is better than 100% of nothing. The only winner here is the exchequer.
If you want to limit profiteering then a price cap is the only way it could work. Windfall taxes are ineffectual.
@Liam Clifden: Bernie Madoffs Ponzi scheme was running for 17 years…
Happy Christmas from the European Central Bank
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