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

Irish Times

5 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.
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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.
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Irish households owe €99.2bn at end of March
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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