logo
Why now is not the time to be complacent on mortgage arrears

Why now is not the time to be complacent on mortgage arrears

Irish Times7 days ago
Thankfully,
mortgage
arrears have been heading in the right direction in recent years. The number of home mortgage accounts in arrears is now less than a third of what it stood at in June 2013 when cases peaked at 142,892, according to a report published by the Government earlier this summer.
The number of mortgage accounts in arrears for more than 90 days is now at its lowest level since 2009, according to
Central Bank
data.
While this is all very promising, given the significant headwinds facing the Irish and global economy, now is not the time to be complacent about mortgage arrears.
The Irish economy is faring well this year but economic growth is expected to fall significantly in 2026. In its latest quarterly economic report, the
Economic & Social Research Institute (ESRI)
said it expects Ireland's gross domestic product (GDP) to grow by 2.9 per cent in 2026 – down from 4.6 per cent in 2025.
READ MORE
The think-tank also warned that if trade wars between the US and its trading partners intensify, its growth forecast will need to be revised downwards.
The ESRI also revised downwards its forecasts for growth in the domestic economy. For its part, the Central Bank has forecast a slight increase in unemployment in Ireland in the next few years as the economy slows.
Since the start of this year, both the Central Bank and the ESRI have repeatedly warned of the risks to the Irish economy posed by the uncertain global economic outlook, particularly in relation to the see-saw tariff announcements of US president
Donald Trump
.
Given the large volume of goods that Ireland sells to the US, Ireland is very vulnerable to such tariffs. But few countries are not. Earlier this year, Taoiseach Micheál Martin said that US tariffs will 'harm citizens no matter where they reside'.
Add to all this economic uncertainty, the house price inflation of recent years and Ireland could be in for a perfect storm on mortgage arrears.
'Irish borrowers, lenders and politicians simply cannot afford to be complacent about mortgage arrears.' Photograph: Getty Images
Irish house price inflation has reached a 10-year high, according to the latest report from Daft.ie, which deals specifically with asking prices. The latest official figures show that Irish house prices are almost 18 per cent above the peak of the property boom in April 2007, supported by growing average incomes.
As would be expected given the trends in house prices, the average mortgages being drawn down by house buyers have reached record levels. In the first three months of 2025, the average home mortgage drawdown value reached €327,972 – the highest level on record, according to the
Banking and Payments Federation of Ireland
.
The average first-time buyer mortgage on second-hand properties exceeded €300,000 for the first time in the first quarter of 2025, increasing by 9.7 per cent year on year to €302,018 – more than double the average drawdown in the first quarter of 2014.
While
ECB
rates
have been falling since June 2024, the prospect of further ECB cuts by the end of this year has been thrown into doubt by fluctuations in oil prices following an escalation of conflicts in the Middle East. Indeed, if European inflation was to start ticking upwards, the ECB could come under pressure to start increasing rates at some point in the coming years.
The Government recently admitted that while mortgage arrears are declining in Ireland, they remain high by international standards. We need to do better than that.
Furthermore, there is still a significant cohort of borrowers who fell into arrears previously that are 'stuck' and unable to move to a cheaper lender or to clear their mortgage. These borrowers would typically have restructured their mortgages after running into problems repaying their loan following the financial crash of 2008 or indeed as a result of another event which led to financial difficulties.
[
Irish households owe €99.2bn at end of March
Opens in new window
]
Recent Central Bank figures show that 51,695 home loans are currently restructured and many of these are split mortgage arrangements, where part of the loan is warehoused.
While most of these borrowers have been able to meet the terms of their restructured arrangement and are not in arrears, many have run into difficulties switching their mortgage as the main banks generally won't consider switching applications from those with a split mortgage arrangement. Many are also unclear about if and how they could clear their mortgage.
These homeowners, many now in their 50s and 60s, are not in acute financial distress but they remain in an uncertain position, with no clear timeline for when – or if – they will own their homes outright.
With retirement approaching, it is increasingly important that these borrowers have access to options that allow them to bring their mortgage to a conclusion in a sustainable and realistic way. The market is thankfully evolving with more options now available to these borrowers, particularly from non-bank lenders.
But more needs to be done for these borrowers to give them as many refinancing alternatives as possible and to prevent others falling into arrears in the future.
Central Bank figures show that 51,695 home loans are currently restructured and many of these are split mortgage arrangements. Photograph: iStock
Encouraging the borrowers to tackle the split mortgage now rather than waiting until the end of the mortgage term should be a priority. A greater number of attractive offers from both existing and new lenders would give borrowers more time to spread the repayments over a longer period and avoid the prospect of them facing a large bullet payment at the maturity date of the mortgage.
While it may ultimately result in higher monthly payments for some borrowers, the incentive is the potential for increased positive equity in the property given the house price growth over the last decade or so.
Irish borrowers, lenders and politicians simply cannot afford to be complacent about mortgage arrears. In the run-up to the Irish property and economic crash of 2008, few knew what was around the corner. The tables could turn today just as quickly as they did back then.
Fergal O'Leary is co-founder and chief commercial officer at Núa Money
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Alcohol health labelling 'will add over a third to costs'
Alcohol health labelling 'will add over a third to costs'

Irish Examiner

time2 hours ago

  • Irish Examiner

Alcohol health labelling 'will add over a third to costs'

Taoiseach Micheál Martin was lobbied by business representative group Ibec to delay the introduction of alcohol warning labels for 'at least' four years due to tariff fears. Ibec chief executive Danny McCoy warned the Fianna Fáil leader that the new requirements would lead to packaging and labelling costs increasing by 'over one-third'. The letter also suggested that some distillers had even suspended brewing in fear of impending tariffs by the US administration. Mr McCoy also sent the letter to Tánaiste and trade minister Simon Harris and health minister Jennifer Carroll MacNeill in early June. The Government agreed earlier last week to suspend the rollout of warning labels for two years. In May 2023, then health minister Stephen Donnelly signed the Public Health (Alcohol) (Labelling) Regulations 2023. It was envisaged that the law would make it mandatory for alcohol product labels to state the calorie content and grams of alcohol in the product. They would also warn about the risk of consuming alcohol when pregnant and about the risk of liver disease and fatal cancers from alcohol consumption. The change was due to come into effect in May 2026, to allow a three-year implementation period for the drinks industry. However, there have been rumblings in recent weeks that the plan would be postponed, with Mr Harris saying that it would be additional disruption and a 'potential trade barrier' as tariff negotiations continue. At Tuesday's Cabinet meeting, the Tánaiste told ministers that Ms Carroll MacNeill will defer the plans for two years. This is despite reports that it would be a four-year pause. Correspondence released under Freedom of Information (FoI) shows that the Taoiseach was being lobbied by Ibec to drop the labelling plans. On June 3, Mr McCoy called for the plans to be dropped for four years 'at least'. 'The wider drinks sector, but particularly many of the new emerging distilleries, have significant exposure to these new tariffs and the wider trade uncertainty,' wrote Mr McCoy. 'The majority of distilling across the country is now suspended. The introduction of new labelling requirements for the drinks sector, which will add over one-third to product labelling and packaging costs, should be suspended for at least four years to give some certainty to operators. 'Reducing regulatory burden costs to free up resources to allow companies invest in finding new markets would be a positive development.' Mr McCoy said that the legislation had been cited by the US administration in its 2025 National Trade Estimate Report on Foreign Trade Barriers, which he said was 'cause for further concern and reason for this legislation to be deferred'. He added: 'The industry does not want this to be an issue of disagreement in overall efforts to secure a resolution on trade relations and restoration of a tariff-free trading environment.' Further correspondence shows the letter was also forwarded from the Taoiseach's office to the Department of Enterprise several days later seeking an update on enterprise minister Peter Burke's engagement with Ms Carroll MacNeill. A letter sent from Mr Burke to Ms Carroll MacNeill on May 15 was also released under FoI. He said that recent months have seen 'significant global uncertainty and a rapidly shifting trading landscape', which he said 'could have profound competitiveness implications for small open economies like Ireland'. Mr Burke said that Ireland would be the first country in Europe to introduce the labels. 'The proposed measures will mean increased production and sale costs for Irish producers and importers and add to the price payable by consumers at a time when prices are also rising due to a multitude of other factors,' wrote Mr Burke. 'Notwithstanding the overarching health benefits of the proposal, I would ask you to consider pausing the introduction of the proposed new requirements.' Calls not to delay plans Meanwhile, Mr Martin was urged not to delay the plans and received a letter just last week from Alcohol Action Ireland chief executive Sheila Gilheany. She said that 'postponing alcohol health information labelling is not consequence free given the thousands harmed by alcohol in Ireland.' Read More Delaying alcohol warning labels prioritises profiteering over health, says Irish Medical Organisation

Coalition warned against diluting contentious Occupied Territories Bill
Coalition warned against diluting contentious Occupied Territories Bill

Irish Times

time2 hours ago

  • Irish Times

Coalition warned against diluting contentious Occupied Territories Bill

The Government will be warned not to allow the potential for legal challenges to be used as an excuse to water down the legislation known as the Occupied Territories Bill . The Oireachtas foreign affairs committee will this week publish its report on a proposal to ban trade with illegally occupied territories in Palestine. The report, finalised on Friday, is understood to recommend widening the legislation to include a ban on services as well as goods. There have been stark warnings from business lobby groups that such a measure could damage the Republic's trading relationship with the US and cause economic harm to Irish businesses and households. The Occupied Territories Bill is now undergoing pre-legislative scrutiny Listen | 41:13 The committee will tell the Government to model the ban on trade with illegal settlements in Palestine on 2014 trade restrictions with Russia regarding illegally occupied territories in Ukraine. The committee, chaired by Fianna Fáil TD John Lahart , which did not have statistics on the volume of trade in services between the State and illegally occupied territories, will call on Minister for Trade Simon Harris to collate and publish such information. It will also tell Mr Harris to establish what kind of backlash the State would face in terms of trade and diplomacy should it ban trade with the occupied Palestinian territories. [ Republic joins 25 states urging end to Gaza war Opens in new window ] Ministers will also be advised to consider what defences could be available to a business charged with an offence under the proposed law. . It is understood that the committee believes further work is required from the Government before the law could be enacted. And it will ask that Attorney General Rossa Fanning's advice on the complex Bill is 'expedited' so it can move forward as a matter of urgency. During meetings before the Dáil rose for the summer recess, Mr Lahart was critical of 'misinformation' about the Bill and the State's motivation for passing it – much of which was repeated by senior US political figures. Chairwoman of US House Republicans Lisa McClaine described the Bill as a type of 'extreme anti-Semitic hate'. [ How life in the West Bank is deteriorating for Palestinians Opens in new window ] It is understood that the committee's report will call on the Government to explain the motivation behind the Bill to European Union and international colleagues, while also lobbying Brussels for further collective EU action against Israel. The committee will propose a Government-funded public communications campaign for domestic and international audiences to explain the facts of the Bill and to challenge misinformation spread about it.

Jim Power: Budget countdown begins with big promises
Jim Power: Budget countdown begins with big promises

Irish Examiner

time3 hours ago

  • Irish Examiner

Jim Power: Budget countdown begins with big promises

The publication of the summer economic statement has set the budgetary process in motion, and the destination will be reached in early October. The two relevant ministers have outlined a budget package of €9.4bn, with a net tax package of €1.5bn, and an expenditure package of €7.9bn. This expenditure package will be comprised of current expenditure increases of €5.9bn or almost 75% of the total; and capital spending of €2bn or just over 25% of the total. Proposed Vat cut On the tax side, the Government has given a commitment to reduce the Vat rate for part of the hospitality sector — the food element — to 9% and this would cost around €580m in foregone taxes. If this is delivered and applies from January 1 next, it means that effectively less than €1bn would be available for personal tax changes. To put this in context, it is estimated that a 1% indexation of the employee tax credit would cost around €230m in a full year, so to index for projected inflation in 2026 would cost somewhere in the region of €460m; or a 1% decrease in the 40% tax rate would cost around €540m. If the government delivers the Vat cut from the beginning of 2026, which it has committed to, the tax package will be small. So not surprisingly, there are suggestions that the cut might be delayed until July, thereby significantly reducing the cost in 2026. If this transpires, the hospitality sector would have every right to be aggrieved. Restaurants and food businesses are the most crucial element of our tourism product, and many businesses are struggling to stay afloat. Inflation Data released by the CSO last week show that in 2024, Irish food prices are the third highest in the EU-27 and are 12% above the EU average. In the year to May, agricultural output prices increased by 20.7%, with cattle prices up by 48%. These prices obviously feed into restaurant input costs, but the pressures are compounded by labour costs, insurance, water charges, commercial rates etc. I am a supporter of the reduced Vat rate, and I think it is now more appropriate to provide some limited support to a key employer of people all over the country, and a vital part of the tourism offering, rather than to pump money through excessive expenditure into an economy that is still doing quite well. Does the Irish economic cycle need a continuation of out-of-control current expenditure now? I think not. Even if the Vat cut is pushed out, the extent of the easing of the personal tax burden will be miniscule. We should have learned from the past We should have learned our lessons from the pro-cyclical policies of the past. The summer economic statement projects planned expenditure of €108.7bn this year, which is €3.3bn higher than planned in Budget 2025, and it is likely to turn out even higher than this latest projection. Not surprisingly, the Irish Fiscal Advisory Council is not happy and has justifiably accused the Government of 'poor planning and budgeting.' Obviously, the ability of the two ministers to deliver the proposed budgetary package, and indeed to deliver the ambitious, but detail lacking, revised National Development Plan, will be heavily contingent on the future performance of the economy, and especially the actions of Donald Trump. Downward creep in projections There is not a lot of detail in relation to economic assumptions in the summer economic statement, but it is interesting to note that for 2025 the Department of Finance is projecting growth of 2% in modified domestic demand (MDD), down from 2.5% in April, and 2.9% in Budget 2025 last October. For 2026, MDD is projected to grow by 1.8%, down from 2.8% in April, and 3% in Budget 2025. There is downward creep occurring in Ireland's economic projections, which seems logical in the context of Trump-induced uncertainty. In relation to the National Development Plan, it is quite amazing that we must await detail on the projected spend until close to budget time. What in the name of God has been happening since January? The aspirations outlined in the revised plan — such as energy, water, housing, transport infrastructure, and climate change — are difficult to argue with, but delivery on time and on budget will be essential. One hopes there will be greater control, transparency and accountability in relation to National Development Plan delivery than we have seen with major infrastructure projects such as the children's hospital and the infamous bicycle shed.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store